Moody’s Investors Service said Tuesday that it has placed the Baa3 issuer rating of Crown Resorts Limited on review for downgrade amid concerns over the “aggressive financial policies” likely to be pursued by The Blackstone Group.
Crown announced earlier this week that it has agreed to sell all of its shares to the private equity giant for a total consideration of AU$8.9 billion (US$6.5 billion), pending receipt of regulatory and shareholder approvals. The sale is expected to be complete in the second half of 2022.
In a note, Moody’s said the transaction would likely lead to a deterioration of Crown’s key debt metrics and less conservative financial policies than are currently factored into the rating.
“Given a successful transaction would put Crown under private equity ownership, and that the private equity business model typically involves more aggressive financial policies and a leveraged capital structure to extract value, Moody’s believes that a successful transaction could likely lead to a downgrade, perhaps of multiple notches,” it said.
“However, if the transaction is unsuccessful, or is funded in a way that allows Crown to continue to maintain adjusted financial metrics in line with Moody’s current expectations, the ratings could be confirmed. The company’s financial strategy and risk management is a key component of our governance risk assessment framework and today’s rating action considers the uncertainty around Crown’s future financial strategy from a potential transaction.”
Moody’s said the current Baa3 rating is based on its expectation that Crown will successfully implement its reform agenda in the wake of damning findings emanating from inquiries in NSW, home to Crown Sydney, and Victoria, home to Crown Melbourne. Reports suggest the casino at Crown Sydney could be operational within weeks.
However, it has also been reported that Blackstone may look to stabilize Crown before selling off its individual assets, which also include Crown Perth in Western Australia. The findings of a third inquiry – into Crown’s Perth operations – are due to be handed down in March.
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