Crown counts the cost of restrictions as loss widens

Crown Resorts has confirmed that it is no longer in discussions with Oaktree regarding a revised proposal tabled in June, as the Australian gaming and hospitality group detailed the impacts of regulatory and COVID-19 challenges for the year ending June 30, 2021.

Amendments made to its initial proposal, which was put to the company in April, would have seen the group buy back a portion, or all, of the group’s shares held by James Packer’s Consolidated Press Holdings.

Under the proposal, Oaktree outlined a A$3.1bn facility consisting of two tranches, firstly that of a A$2bn private term loan, and a A$1.1bn loan convertible into new shares to be issued by Crown at a strike price of A$13 each.

This comes as the casino operator reports a net loss for the year of A$261.6m compared to a profit of $79.5m one year earlier, which itself represented a year-on-year slide of 80.2 per cent. 

Furthermore, revenue is reported to have dropped 31.3 per cent to A$1.53bn from 2020’s A$2.21bn, with EBITDA down 77.4 per cent to $114.1m.

Crown, which has lost the licence for its Sydney casino, is the subject of a formal enforcement investigation by AUSTRAC’s Enforcement Team into potential non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, with Royal Commission’s also established in Melbourne and Perth to determine the organisation’s operational suitability.

Despite reporting a “severe impact on operations from the COVID-19 pandemic,” Crown updates that its Perth operations traded “above expectations” after re-opening with restrictions towards the end of June 2020, and remained open for the entirety of H1.

Despite facing several short-term closures throughout H2, the group adds that its trading performance has rebounded quickly following each shutdown.

Jane Haltonm Crown’s interim chair, explained: “2021 has been a challenging year for Crown, with intense regulatory scrutiny and unprecedented impacts on business operations from the COVID-19 pandemic.

“I would like to thank Helen Coonan for stepping up and providing leadership and stability during this period. Helen has played an important role at Crown over a long period of time, particularly since her appointment as executive chair where she has made a major contribution to Crown’s reform program.

“Dr Ziggy Switkowski will join the board as chair following receipt of all necessary regulatory approvals as part of the planned succession process. The board welcomes Dr Switkowski to Crown and is confident he has the necessary capability and experience to lead the board at what is a critical time for the organisation. 

“Under the new leadership of our significantly renewed board and senior management team, Crown is well placed to continue the momentum of change as we implement the reforms contained within our comprehensive Remediation Plan. 

“We believe successful implementation of this Remediation Plan will position Crown as an industry leader in our approach to governance, compliance, responsible gaming and the management of risk – in particular the risk of financial crime – underpinned by an uplifted organisational culture.

“We will work hard to earn the continued trust of our regulators and communities as a responsible operator of outstanding quality integrated resorts.”

Providing an outlook for the period that lies ahead, the firm acknowledges that it “continues to operate in an uncertain environment with a number of factors expected to impact financial performance throughout the 2022 financial year”.

This includes the outcome of the aforementioned regulatory processes, the consequences of which have the potential to “significantly impact the financial performance and operations” of Crown.

Further factors noted by the company includes COVID-19 related closures and operating restrictions; elevated corporate costs; and increased investments in resourcing and capability across a number of key areas, including financial crime, compliance and responsible gaming functions.

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