Ratings agency Fitch has removed the Rating Watch Negative (RWN) it placed on Crown Resorts in November 2020 following last week’s revelation that the company would be permitted to continue operating its Melbourne casino.
The resolution of the RWN came on the same day that Crown Melbourne announced it was resuming gaming activities for the first since all operations were suspended on 9 August due to another outbreak of COVID-19 across the city. Crown issued a statement on Friday confirming that some gaming activities and more non-gaming would open from 6pm that afternoon, followed by further gaming on Saturday as restrictions across the state of Victoria were eased.
“We are pleased to be able to welcome back thousands of our employees to Crown Melbourne and look forward to again providing exceptional experiences for our customers as we emerge from the recent challenges of the COVID-19 pandemic,” said CEO and Managing Director Steve McCann.
In one of the better weeks for Crown shareholders in some time, the company learned last Tuesday that although Victoria’s Royal Commission found it unsuitable to retain its casino license, the license would not be immediately cancelled. Instead, a Special Manager will be appointed to oversee Crown’s efforts to return to suitability before a final decision on the license is made in two years’ time.
Fitch said in a note that the RWN was removed following the release of the Victorian Royal Commission report and response by the state government, which agreed that immediate cancellation is not in the interests of the Victorian community.
It also predicted revenue would increase by around 15% in FY22, “reflecting the expected reopening of Crown Melbourne. Revenue to increase by around 50% in FY23 and 10% in FY24 with properties expected to be open for the entire year and any lasting restrictions removed, and by around 2% in FY25.”
However, Fitch has affirmed Crown’s Issuer Default Rating at “BBB” with a negative Outlook.
“The affirmation reflects the commission’s view on Crown’s reform and our belief Crown’s cash generation and leverage will remain consistent with its rating, despite the recommended remediation,” the agency said.
“The Negative Outlook reflects the execution risks that remain as Crown continues its remediation to satisfy the regulators. It also faces other processes and investigations. Fitch may take negative rating action if there is any indication of weakened commitment to reform, or other negative regulatory actions that affect its licences across the country.”
Another ratings agency, Moody’s Investors Service, has also affirmed Crown’s “Baa3” issuer rating with the outlook remaining negative.
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