Moody’s Investor Service has placed Crown Resorts’ Baa3 issuer rating on review for downgrade, following the board acceptance of an acquisition deal from Blackstone.
“While the full details of the proposed transaction and Blackstone’s ultimate plans for Crown’s ongoing business and financial profile have not been made public yet, Moody’s expects that the proposed transaction, if completed, will likely lead to a deterioration of Crown’s key debt metrics and less conservative financial policies than currently factored into the rating.”
“Given a successful transaction would put Crown under private equity ownership, and that the private equity business model typically involves more aggressive financial policies and a leveraged capital structure to extract value, Moody’s believes that a successful transaction could likely lead to a downgrade, perhaps of multiple notches.”
However, Moody’s notes that Crown could continue to maintain its rating should the transaction be unsuccessful or is funded in a way that allows Crown to continue to maintain adjusted financial metrics in line with Moody’s current expectations.
“The company’s financial strategy and risk management is a key component of our governance risk assessment framework and today’s rating action considers the uncertainty around Crown’s future financial strategy from a potential transaction.”
