Ratings agency Moody’s Investors Service has confirmed an issuer rating of Baa3 for embattled Australian casino operator Crown Resorts Limited, but has changed its outlook to negative.
According to Moody’s analyst Maadhavi Barber, Crown has “good potential to maintain its investment grade credit profile, and is willing and able to remediate shortcomings identified by the Bergin Inquiry in New South Wales, as well as any additional shortcomings that may be identified by regulatory investigations in other states.”
However, the steps it needs to take to reach suitability are “far-reaching and complex” which has resulted in its negative outlook.
Crown Resorts was last month found unsuitable by the New South Wales Independent Liquor and Gambling Authority (ILGA) to hold a state casino license, reflecting recommendations contained in a report by Commissioner Patricia Bergin following completion of a recent inquiry. (See IAG’s Bergin inquiry special video report featuring former Victorian gaming regulator Peter Cohen and former South Australian gaming regulator David Green.)
However, while Crown is already working with the NSW regulator to reach suitability, it is also facing a similar inquiry in Western Australia and a Royal Commission in Victoria before the year is out. Both are expected to place their own demands on Crown to ensure they retain their respective licenses.
Despite such concerns, Moody’s said it doesn’t expect any new surprises to emerge from either inquiry, nor for the governments of Western Australia or Victoria to make overt moves to impede their Perth and Melbourne operations in the meantime.
“Crown is the largest single site employer in both Victoria and Western Australia,” Moody’s said. “The rating agency expects governments in both Victoria and Western Australia are likely to keep the facilities open to support employment and economic growth following a particularly difficult year as a result of the coronavirus outbreak.”
Pointing to a third ongoing investigation by Australian AML watchdog AUSTRAC, Moody’s said Crown remains well placed to absorb a fine of up to 30% of its estimated fiscal 2022 revenue but noted a similar inquiry into missteps by the local banking sector resulted in penalties of only 3% to 6% of revenue.