Packer focusing on Vegas, Sydney
Australian casino giant Crown Resorts just slashed its stake in Melco Crown Entertainment from 34 percent to 24 percent. But that doesn’t mean James Packer and company are not fully committed to the joint venture, which is heavily concentrated in recession-plagued Macau.
Crown Director Helen Coonan recently told the Sydney Morning Herald the move did not indicate a decreased interest in Macau, home of its new Studio City resort, which opened last fall.
“The downturn in Macau is in the short term and in the medium-to-longer term it’s a sound investment,” Coonan said. She added that Packer cut shares as “part of a capital management strategy.
“Crown still has a significant footprint in Macau,” she continued, “and in the longer term, Crown is of the view that these assets are just gold because of their position.”
Packer, who owns 53 percent of Crown, started talks in late 2015 with private equity firms and pension funds about an $8 billion plan to take Crown private. The Herald reports that those talks have stalled, a circumstance confirmed by Coonan. “On the privatization, we’ve never had a proposal brought to the board,” she said.
Meanwhile, Moody’s called the Melco deal a “credit positive” for Crown, and the resulting $US800 million “will enhance liquidity at a time when Crown is directly engaged in new developments and projects with a total capital cost of more than $6 billion over the next six years.” It could also help Crown pay down debt, divert some capital to investors and also fund its developments in Las Vegas and in Sydney. Moody’s expects debt to be a priority; it could improve adjusted debt to EBITDA from 1.0 to 2.0 times for 2016.
Forbes reports that Packer has always had a hands-off approach to some Melco developments.
At the opening of Studio City in October, he said the $3.2 billion project was a project of his partner, Lawrence Ho.
“I think I was helpful getting the sub-concession from Steve Wynn” in 2006, he said at the time. “We’re a role model joint venture of how an Australian company and Chinese company should work.”
