Crown Resorts in good shape to absorb casino shutdown but dividends unlikely: Fitch - IAG

Thursday 2nd April 2020

Australian casino operator Crown Resorts is well placed to absorb the closure of its gaming operations, but may need to temporarily abandon its fixed dividend policy, according to ratings agency Fitch.

In a Thursday note addressing the recent closure of Australian casinos to stop the spread of coronavirus, including Crown's properties in Melbourne and Perth, Fitch Ratings pointed to the fact that Crown has no significant bond maturities before the end of the 2025 financial year, and should be able to renew AU$230 million in committed credit facilities set to mature in the next six months.

"Crown Resorts Limited's low net debt position at 31 December 2019 and highly variable cost structure provides the Australian gaming operator with headroom to absorb the effect of the government shutdown of casinos in the country," it said.

"Fitch believes that the company will be able to reduce its cash outflows significantly over this period, given its highly variable cost structure - benefiting in particular from the ownership of its properties (and rentals for the Melbourne land are minimal under the agreement with the Victorian government).

"These actions may include standing down staff and a reduction in other overheads, as well as incurring lower gaming taxes which directly reflect the decline in gaming volumes.

"Furthermore, we believe that Crown could implement extraordinary measures, such as the suspension of its dividend, even though it has a fixed-dividend policy, to preserve cash and maintain the strength of its balance sheet."

Crown has "manageable covenant risk and available liquidity to meet operating expenses over the duration of the shutdowns," Fitch added, while it may also be able to draw on government subsidies, including fortnightly payments to Australian workers across the country, to reduce cash outflow.

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