Ratings agency Fitch has downgraded the Issuer Default Rating of Australia’s Crown Resorts from “BBB” to “BB-” following the company’s acquisition by US private equity firm The Blackstone Group.
In a Wednesday note, Fitch said the downgrade reflects the deterioration in Crown’s financial profile based on the more aggressive capital structure put in place by Blackstone to fund the acquisition, which Fitch expects will form the basis of Crown’s capital structure under the new ownership.
This capital structure includes the news that Blackstone would debt finance AU$5.4 billion (US$3.7 billion) of the AU$8.9 billion (US$6.5 billion) purchase price and allow entities in the new group to obtain commitments for a further AU$500 million under a super senior revolving credit facility to finance its business operations.
As a result, Fitch said it expects Crown’s leverage – calculated as adjusted debt/operating EBITDAR – to deteriorate to around 7.5x based on the initial funding for the transaction only.
Fitch has also maintained Ratings Watch Negative (RWN) on Crown but revealed it is withdrawing its ratings on Crown given the company’s plans to delist from the Australian Stock Exchange and go private under Blackstone.
“Fitch expects that Crown’s business profile will retain many of its strong structural features, including the overall licencing and regulatory regime in Australia, and support its business profile,” it said. “However, uncertainty remains around the final strategy and funding levels required, which could see Crown’s leverage be sustained at levels higher than we currently expect.
“As a result, Fitch has chosen to withdraw Crown’s rating on RWN to reflect these risks. We also expect that limited information will be made public to enable a full assessment of Crown’s business and financial profile once the review is complete, following Crown’s delisting from the Australian Stock Exchange and Blackstone’s intention to operate it as a private company.”
Fitch said it expects Crown’s revenue to increase by 15% in FY22, followed by a 50% rise in FY23 and another 10% in FY24.
RelatedPosts
