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Australia – Crown well positioned to survive casino closures

By - 5 April 2020

Fitch ratings agency has said Crown Resorts, operator of Crown casinos in Melbourne, Victoria and Perth in Australia, has ‘manageable covenant risk and available liquidity to meet operating expenses over the duration of the shutdowns.’

“Crown Resorts’ low net debt position at December 31 2019 and highly variable cost structure provides the Australian gaming operator with headroom to absorb the effect of the government shutdown of casinos in the country,” it said.

“Fitch believes that the company will be able to reduce its cash outflows significantly over this period, given its highly variable cost structure – benefiting in particular from the ownership of its properties (and rentals for the Melbourne land are minimal under the agreement with the Victorian government).
“These actions may include standing down staff and a reduction in other overheads, as well as incurring lower gaming taxes which directly reflect the decline in gaming volumes.

“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.”

The coronavirus pandemic has also halted an inquiry into the operator by The Independent Liquor & Gaming Authority into potential links to organised crime connected to junket groups.

The authority said: “The Independent Liquor & Gaming Authority (ILGA) has decided that most of the work of the Casino Inquiry will be deferred in the current context of the COVID-19 epidemic until it is considered safe and practicable for all public aspects of the work to resume. This decision follows careful consideration of the current COVID-19 situation, Commonwealth and State Government advice and restrictions. The Inquiry and its public hearings will resume promptly as soon as circumstances allow.”

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