Crown Resorts expects bottom line to be in the red for FY21

By William Brown Updated
Victoria mulls further casino and gambling law changes

Government imposed restrictions across Australia has hammered Crown Resorts’ gaming and accommodation operations, as company earnings dwindle for the second year in a row.

Business News Australia reports that Crown Resorts issued a trading update on July 5, where the casino giant said its FY21 results were “significantly impacted” by the COVID-19 pandemic, with properties closed and operating restrictions in place for large chunks of the period.

Crown expects to record a statutory loss after tax for the full year and theoretical earnings before interest, tax, depreciation and amortisation of between $90 to $100 million after taking into account closure costs.

Excluding closure costs, EBITDA would have been between $240 to $250 million, meaning government restrictions saw the gambling and resort company lose around $150 million in earnings.

This compares to the group’s FY20 closure costs of $81.6 million, and earnings during that period of $504.6 million, most of which was generated pre-pandemic.

It is also a major departure from the company’s FY20 profit after tax of $79.5 million, which was a huge hit at the time, down 80.2 per cent on the 2019 financial year.

The company expects to report net debt at 30 June 2021 of approximately $900 million, as company earnings dwindle.

Star and Oaktree still in the mix for Crown takeover

The trading update comes as the company is in the midst of a takeover tussle, with Oaktree Capital Management and The Star Entertainment Group both making their own proposals to buy part or all of the company.

Oaktree’s bid is worth $3.1 billion, and if accepted, would see the company buy-back shares held by James Packer’s Consolidated Press Holdings.

Meanwhile, the Star is attempting to buy all of Crown for $12 billion.

The bids come as the casino operator is under the microscope of two Royal Commissions in separate states, which will determine whether the company is suitable to hold a casino licence.

In mid-June, it was reported that Oaktree submitted a revised funding proposal to Crown which could be used to buy back James Packer’s stake in the casino operator.

The seven-year $3.1 billion deal consists of a private loan worth $2 billion and a $1.1 billion loan convertible into new shares.

The convertible component could allow Okatree to acquire a 10 per cent stake in Crown.

The revised offer comes after Crown formally rejected a separate offer from private equity firm Blackstone, while another takeover bid by rival Star Entertainment is still under review.

The convertible component of the deal would allow Oaktree to acquire the new shares at a price of $13 each in specified circumstances, including at any time after the first anniversary of the facility provided that the Crown share price is above $13, based on a 30-day volume weighted average price.

However, the number of shares issued to Okatree would be capped at an amount that ensures the Los Angeles-based asset manager cannot hold more than 10 per cent of Crown’s shares on issue.

The revised offer is slightly higher than an earlier one that was put forward in April and focuses largely on funding “a selective buyback” of Packer’s 37 per cent stake, which he owns via his holding company, Consolidated Press Holdings.

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