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Australia – Fitch concerned over ‘changes in operating conditions and regulations’ for Crown

By - 26 October 2020

Fitch Ratings has given Australian casino giant Crown Resorts a negative outlook due to ‘weaknesses in Crown’s governance structure that were revealed during an inquiry in New South Wales, as well as the risks to Crown’s operations and financial profile from potential outcomes of the various inquiries, which could include fines, changes in operating conditions and regulations, or changes to or loss of licences.’

The operator is currently the subject of an inquiry by the NSW Independent Liquor & Gaming Authority into alleged ties with criminal organisations via its junket operations from China and potential anti-money-laundering breaches.

Fitch stated: “Under our base case, Crown would be able to absorb around AU$800m in fines and penalties such that its financial profile remained consistent with its rating. If this were to materialise, it would be among the largest fines imposed on a corporate in Australia. Alternatively, the most severe regulatory action would be loss of licence. We believe there is low probability of this event, and hence have captured the risks under the Negative Outlook.”

“We believe Crown’s Melbourne and Perth properties, which accounted for over 90 per cent of revenue since FY18, will continue to benefit from predictable local markets and Crown’s position as each region’s sole licensed casino operator,” Fitch added. “Border restrictions in place to combat COVID-19 will see VIP revenues remain low over the foreseeable future. Nevertheless, this volatility has a minimal effect on the group’s overall results, because VIP revenue made up less than 25 per cent of normalised group revenues from FY16.”

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