Crown Resorts reportedly is relying on selling apartments at its luxury resort in Sydney, Australia to reduce its debt load. Crown was prohibited from opening a casino at the new Barangaroo property due to an ongoing t investigation by the government of New South Wales.
According to the U.K. Guardian, the Aussie casino giant could be forced to repay $175 million in debt to a single investor if credit ratings agencies continue to mark down the company. In late November, Moody’s slashed Crown’s score to Baa3, “one notch above junk,” the newspaper noted; a junk rating would make it harder and more costly for Crown to borrow money. Fitch and Standard & Poors rated the debt at BBB, two notches above junk. If both Fitch and S&P withdraw or downgrade their ratings, the investor could demand repayment of the full $175 million plus an additional “make-whole premium.”
Crown had expected to open the casino at Barangaroo before Christmas. It was forced to change its plan due to the probe, which is looking at purported instances of money laundering at Crown properties. As part of efforts to stave off regulatory sanction, Crown has already banned offshore junket operators.
In a November note, Moody’s wrote that Crown could face “large fines and/or changes to Crown’s licensing conditions in Sydney, with license loss being the most severe, although still unlikely, outcome. … The review also raises the potential for regulators of Crown’s operations in Victoria and Western Australia to undertake their own reviews, with possible negative consequences for Crown’s business in those states.”
According to Mondaq.com, the investigation is looking into “cuckoo smurfing” at Crown resorts, “a form of money laundering where large transactions are broken down into smaller deposits to avoid detection.”
Robert Craig, lawyer for Crown, said “an inference can be drawn” that the activity occurred. The Crown Resort board claimed the company was unaware of the suspicious activity, which was flagged by the banks and later raised with senior staff. “One needs to be careful of the standard of proof one is applying as well,” he said.
