The story today seems to be much as it was in December when Larry Gandler, a gaming analyst for Credit Suisse noted in a research report that Crown Resorts was trying to fund their Las Vegas Strip Alon Resort development by selling off part of their +/-73% stake in the project. At that time he noted that a slowdown in China’s economy was lowering investor interest in the property. He also noted then that the speed at which the equity sale was ‘progressing’ could hurt Crown’s debt-to-cash flow ratios, according to a report in the Las Vegas Review-Journal at the time.
Today the Sydney Morning Herald is reporting that Crown is still looking to reduce its stake in the project to about 45% from it’s current controlling interests of around 73% to raise money to finish the project. Crown’s current partners in Alon Leisure Management include Andrew Pascal, former boss at Wynn Resorts just across the street, and Oaktree Capital Management, who have also been on board since Crown announced they had acquired the site of the former New Frontier Casino in August 2014.
The Herald reports that Crown is looking to raise about $1 billion to complete and open the maverick casino concept but plays down any urgency, saying the land is simply appreciating in value with each passing day.
A company earnings call last week also saw Crown’s CFO Ken Barton explain that although the debt market was challenging, and they aren’t sure what sort of debt to equity mix will be best, they were working on other elements that help in building the “business case”. CFO Barton said, “We haven’t been prescriptive about what the right mix of debt or equity is or what the source of that equity is,” he noted.
Design work, funding options, and permitting are all progressing, as are negotiations on a construction contract, the Herald quoted Deutsche Bank analyst Mark Wilson as saying. “We believe this project may be difficult to progress given the recent increase in credit spreads,” said Wilson.
Crown may be in the process of reorganizing priorities with several other projects competing for capital expenditures within the company. It’s Perth casino at Burswood is being refurbished, the company is committed to building a 90 story hotel and apartment complex in Melbourne at a cost of some $1.5 billion, and $2 billion is needed to complete Crown Sydney at Barangaroo – a project that has already seen requests for downsizing and a delayed launch date of at least a year and a half.
Reports in December also indicated that James Packer may be moving to take Crown Resorts private through his Consolidated Press Holdings investment vehicle. Packer currently has a 53% interest in Crown after a sweep of 18 million shares in November. A scant few days after the privitization revelation Packer resigned from the board of directors at Crown after stepping down as chairman in August.
Unless credit markets improve, which could occur through by stabilizing and increasing oil prices, a stronger U.S. economy, and a leveling out in China’s economy, the prospects of new investors being found to take up about a quarter of the total stake in Alon Leisure Management, which is estimated to be around $425 million seem fairly slim – meaning a 2018 opening date, as planned, is looking less likely.
Update: Statement from Andrew Pascal – Founder, Co-chairman & CEO of Alon Leisure, Alon Las Vegas
“The report related to ALON’s financing has more to do with the macro financial markets than with Alon Las Vegas specifically. There is no question that the environment is difficult for everyone at the moment, but deals are still getting done. With that said, the Las Vegas market has never been stronger – record visitation, record revenue. We have the right team, the right idea, the right timing and the right location. We will continue to advance the development and ultimately secure the capital we need.”