Credit rating agency Moody’s Investors Service has stripped Australia-based Crown Resorts Limited from its Ba3 corporate family rating (CFR), following a similar move from credit rating agency Fitch, which a few days ago also downgraded the company’s credit rating.
Downgrade Resulting from Blackstone Acquisition
The recent changes announced by the two major credit rating agencies are resulting from the newly executed acquisition of Crown Resorts Limited by US-based private equity firm The Blackstone Group. The casino operator agreed to the deal with Blackstone back in February this year, however, the acquisition was finalized at the end of June.
The total price for acquiring all shares of Crown Resorts amounted to AUD 8.9 billion ($6.5 billion), which equals AUD 13,10 ($8,93) per share. Blackstone made three bids for Crown Resorts prior to signing an agreement, first offering AUD 11,85 ($8,09) per share early in 2021 and then upping its bid to AUD 12,35 ($8,43) per share shortly after that. Before the acquisition, Blackstone held a 9,99% stake in Crown Resorts, which the group bought from Melco Resorts & Entertainment back in April 2020.
Moody’s announced its withdrawal of Ba3 on the backdrop of the deal with Blackstone. The credit rating agency issued a statement noting that it has “decided to withdraw the rating because it believes it has insufficient or otherwise inadequate information to support the maintenance of the rating.”
It followed suit after Fitch, which this week also downgraded the credit rating of Crown Resorts.
The Downgrade from Fitch
A couple of days ago Fitch announced that it is downgrading Crown Resorts from “BBB” to “BB-”. Fitch based its decision on the changed capital structure of the company after the acquisition by Blackstone. The comments by Fitch were as follows:
“Fitch expects that Crown’s business profile will retain many of its strong structural features, including the overall licensing and regulatory regime in Australia, and support its business profile. However, uncertainty remains around the final strategy and funding levels required, which could see Crown’s leverage be sustained at levels higher than we currently expect.”Fitch Ratings
Fitch’s Ratings Watch Negative (RWN) remained on Crown Resorts. Fitch’s decision on the downgrade was also affected by the fact that Blackstone is planning to delist the company from the Australian Stock Exchange and run it as a private firm.
However, both credit rating agencies have stated that they will review their ratings once more information is available about the financial structure and situation of Crown Resorts after it became part of Blackstone.