In positive news for Crown Resorts, Fitch Ratings Inc. says the Australian casino operator’s “low net debt position” and “highly variable cost structure” will help power it through the coronavirus shutdown ordered by the country’s government.
Fitch said Crown has “headroom to absorb the effect” of casino closures, in spite of “significant reduction” in revenues and high capital expenditures over the remainder of 2020. Crown is currently completing a VIP casino property in the Barangaroo section of Sydney, New South Wales.
In other good news for Crown, an inquiry into its suitability for a casino license in Sydney, which had been under way last month, has been tabled due to the Covid-19 outbreak. Casinos in Australia were ordered to close on March 22 as part of efforts to contain the disease.
Fitch said the casino operator would be able to “reduce its cash outflows significantly,” in part by “standing down staff” and a “reduction in other overheads.”
“Furthermore, we believe that Crown could implement extraordinary measures, such as the suspension of its dividend, even though it has a fixed-dividend policy, to preserve cash and maintain the strength of its balance sheet,” added Fitch.
Crown rival Star Entertainment Group is coping with the viral outbreak and shutdown by deferring the payment date of its first-half fiscal-year 2020 dividend from April 1 to July 2. It has also furloughed 90 percent of its nearly 9,000 employees, including senior management.
According to GGRAsia, Fitch said Crown should be able to deleverage from fiscal-year 2021, “should restrictions be lifted from July 2020 and demand recovers progressively.
“Under this case, we have assumed that Crown does not declare a final dividend for fiscal-year 2020 and interim dividend in fiscal-year 2021 to preserve its liquidity without the need to raise additional debt, but that final dividends are resumed in fiscal-year 2021,” stated the ratings agency.
Crown also has casino resorts in Melbourne, Victoria and Perth, Western Australia. In October, Fitch affirmed Crown’s “BBB” credit rating with a stable outlook.
