Crown warns of loan default risk if royal commission revokes casino licence
Crown Resorts has claimed it could default on its debt if Victoria’s royal commission makes negative findings against its Melbourne casino licence with “severe consequences” for shareholders and thousands of employees.
The casino giant’s executive chairman Helen Coonan on Thursday denied the company was trying to interfere with the inquiry when it wrote to Victoria’s gaming minister Melissa Horne last week warning it was “not in the public interest for Crown to fail”.
Crown says it could default on its loans if the commission makes adverse findings against it. Credit:Chris Hopkins
A redacted version of the letter was made public on Friday morning, and shows Crown told the minister that the jobs of 12,000 people who work at its Southbank complex could be at risk if there was a negative finding against it.
Commissioner Ray Finkelstein is considering whether Crown is fit to hold it licence for the Southbank casino, after an inquiry in NSW ruled in January it was unsuitable to run its new Sydney casino.
References to any particular outcome from the inquiry were redacted in the letter, but it appears to contemplate the $8 billion ASX-listed group losing its licence.
The letter goes on to say that Crown would be at risk of breaching its lending covenants as a result of a negative ruling in, and makes reference to conditions attached to around $700 million of company debt.
“If there is an EOD [event of default] it may have severe consequences for Crown and all its stakeholders,” the letter from Crown’s lawyer, Arnold Bloch Leibler partner Leon Zwier, says.
“This will impact on Crown’s shareholders, employees, unions, trade creditors, patrons, the hotel precinct and the Melbourne tourism industry.”
A default could also “provide potential overseas suitors an opportunity to take advantage of the situation”, the letter says.
Crown has in recent months received takeover offers from US private equity firms Blackstone and Oaktree, as well as a merger proposal from its Sydney rival The Star.
The letter says that most of Crown Melbourne’s employees are “disconnected from, and have not directly or indirectly contributed to the failures of Old Crown”.
“Through COVID 19 they have suffered significant uncertainties. They will suffer greater uncertainties if there is an [event of default],” it says.
Mr Zwier asked Ms Horne to meet with him and Ms Coonan “urgently to discuss these issues and a proposal to put in place additional safeguards to further assure the state the Crown is different from Old Crown”.
The Victorian royal commission’s final public hearings are being held on Friday. Commissioner Finkelstein will report his findings back by October 15.
At 1.14pm Crown’s shares were trading 3.3 per cent lower at $10.83. The stock has tumbled 13 per cent in the past month.
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon
Most Viewed in Business
From our partners
Source: Read Full Article