Australian billionaire James Packer and his Crown Resorts have a strong reputation in Australia and Macau and are now looking to build their first casino in Las Vegas. This new casino is called Alon Las Vegas and is estimated to cost anywhere between $1.6 to $1.9 billion.
Melco Crown, a Packer venture with Lawrence Ho, recently opened ‘Studio City’ in Macau which was a $4 billion plus mega-casino resort and the company has a number of projects in the pipeline including the Alon Las Vegas that has put a financial strain on its resources. Crown Resorts currently has a 73 percent stake in the Alon Leisure Management venture but has been contemplating for the last few months about selling a bigger percentage of its stake to investors in an effort to be able to raise more capital.
The property for the Alon Las Vegas hotel was acquired by a group consisting of James Packer, Oaktree Capital and ex-Wynn Resorts executive Andrew Pascal. The group reportedly paid $260 million to acquire the land.
Now Crown Resorts wants to lower its stake to about 45 percent which will make it more feasible for the company to control its balance sheet and its debt. During 2015, the company saw its debt rise to $2.5 billion and stand at 47 percent which poses a few concerns for the company as it needs to ensure that it’s Standard and Poor’s BBB credit rating is managed. The rating has to have a leverage of 2.5 times debt to its Earnings Before Interest, Taxes, Depreciation and Amortization’ (EBITDA).
Crown Resorts has faced a significant drop of revenue from its Melco Crown enterprise in Macau as the anti-corruption crackdown has resulted in huge losses for the casino industry. Melco Crown reported a 57 percent drop in revenue and that has had a huge impact on overall revenue for Crown Resorts. While there have been reports that Crown Resorts is finding it hard to find investors for its Alon Las Vegas project, Pascal has played down the situation stating that the Alon Las Vegas project is going on as per schedule.
In a statement, Pascal said “We are currently in the cycle of raising our capital, and the project has been well received. And while the macro-economic environment, particularly in Asia, is a bit turbulent, we remain confident in our capacity to complete our financing and execute our project.”
Crown Resorts has had a tough time during 2015 as share prices have fallen by as much as 20 percent which wiped out close to $2 billion.