Resorts has options to fund capex plans: analysts
- 10th January 2015
Resorts has several options to fund its ambitious
$3 billion spending program, aside from raising equity.
the casino operator may be able to sustain its investment-grade
ratings through raising hybrid debt or introducing
a join venture partner, analysts say.
controlled by James Packer, is expanding with various
costly projects, both domestically and internationally,
to drive future growth. The committed projects span
from Perth, Sydney and Melbourne. There are potential
developments in Brisbane, Las Vegas and Sri Lanka
and even Japan on the cards.
Stanley analysts estimate Crown will spend $3bn on
project capex and investments between financial years
2015 and 2019, peaking in financial year 2016.
some bankers believe Crown may potentially raise equity
to fund these significant capex commitments, Morgan
Stanley analysts say this is unlikely.
feedback suggests that (Crown) has flexibility to
fund this, by raising hybrid debt (similar to that
already on the balance sheet) that may be treated
as equity, cutting dividends or introducing JV partners,
Morgan Stanley said in a research note.
hybrid debt typically demands a higher credit spread,
it is less burdensome on Crowns credit rating,
the analysts also noted.
is currently rated two notches above sub-investment
grade, with a BBB rating by both Fitch
and S&P. Moodys this week reaffirmed its
Ba3 rating on Crown, even as it expressed caution
over the revenue outlook for is Macau joint venture
forecast Crowns net debt to increase from $1.7bn
in financial year 2014 to $3.5 billion by financial
year 2018, while its pre-tax earnings is expected
to reach just over $1 billion by then.
Crowns balance sheet will remain safe from any
negative implications on its credit rating if all
the new borrowings is raised as hybrid debt, according
to the analysts calculations.
Crown may reduce its capex burden by introducing a
joint venture partner, particularly for larger constructions
like the $1.5bn Sydney Barangaroo project.
Crown raises hybrid debt (as it has previously) or
introduces a JV partner to fund the capex, then Crown
may be able to sustain its investment grade rating
at a level of relative comfort, the analysts
is also likely for Crown to cut dividends, as the
company will prioritise completing expansion
projects ahead of growing or sustaining dividends,
week Crowns Melco Crown Entertainment venture
applied to delist from the Hong Kong Stock Exchange
just three years after listing its shares in the Chinese
financial hub, citing limited fundraising opportunities
and onerous compliance obligations and costs.
gambling company, which is 33.6 per cent owned by
Crown Resorts, operates casinos in Macau, said it
would maintain its primary listing of American depositary
shares on the Nasdaq Stock Market, where Melco Crown
has been listed since December 2006.