Crown Resorts remains the subject of two royal inquiries in Australia regarding its suitability to conduct casino operations.
Fitch Ratings, one of the “Big Three” credit rating agencies, said in a note today that the continued probes necessitate maintaining a negative grade for the Aussie casino giant. Fitch is keeping Crown Resorts at “BBB” — which still classifies as “investment grade,” but is the lowest classification before being downgraded to “non-investment grade.”
Fitch has held Crown on its Rating Watch Negative (RWN) since November of 2020. When one of the “Big Three” places a company on a negative rating watch, it implies there’s an unresolved circumstance that could greatly impact the company’s credit rating in the near future.
Crown is subject to royal commissions in its two main jurisdictions, Victoria and Western Australia (WA), to determine its suitability to hold a gaming license, which is captured under the RWN. The recommendations from the royal commission in Victoria are expected to be handed down in October 2021 and from the one in WA in March 2022,” the Fitch commentary explained.
Crown Resorts owns and operates casinos in Melbourne and Perth. Its $1.6 billion resort and luxury residential complex in Sydney opened last December as a non-gaming property after an inquiry in New South Wales found the company unqualified to operate a casino in the Aussie state.
The Royal Commissions in Victoria and WA came as a result of a Royal Commission Inquiry in New South Wales concluding that Crown Resorts is unfit to possess gaming privileges.
The NSW review found that Crown had a long track record of failing to properly monitor its casino cashier cages from being used by illicit organizations to launder dirty money. Alleged links to organized crime throughout Asia were also identified.
Former NSW Supreme Court Judge Patricia Bergin, who headed the NSW Inquiry and determined its final ruling, said billionaire James Packer additionally had unjust influence over Crown Resorts.
Packer is battling mental health issues, and stepped down from the organization he founded in 2018. Though he serves the company in no official capacity, Packer retains a 37 percent ownership position in Crown Resorts.
Corporate Changes Underway
Since Bergin issued her damning NSW verdict in February, Crown has undergone a series of steps to try and improve its corporate governance. Numerous board seats and C-level offices have changed hands, and Crown suspended working with junket groups that have long brought VIP high rollers to its casinos in Melbourne and Perth.
Crown’s measures to address its deficiencies highlighted by the NSW inquiry include forming a compliance and financial crime department that reports to the board, and ceasing dealings with all junket operators, the main factor initiating the investigations,” Fitch detailed in its ratings report.
The Royal Commission in Victoria is expected to hand down its suitability verdict by the end of the year. The Western Australia probe is projected to conclude in the first half of 2022.
Fitch says Crown Resorts will presumably remain on RWN until the conclusion of the probes, and the casino company successfully implements measures recommended by the two inquiries.