Crown Resorts at Future Risk of Default, Auditor Warns on Going Concern
Posted on: September 9, 2021, 11:10h.
Last updated on: September 9, 2021, 03:13h.
Auditor KPMG has said the various regulatory investigations swirling around embattled casino giant Crown Resorts, coupled with the pandemic effects, have created “material uncertainties” about whether the operator can continue as a going concern.
The auditor warned that further cancellations or suspensions of Crown’s gaming licenses in Australia could cause the company to default on some of its debts.
Meanwhile, KPMG said Australia’s financial intelligence agency AUSTRAC was “very likely to commence civil penalty proceedings against Crown Melbourne and Crown Perth,” which it expects to result in the casinos paying “significant civil penalties.”
The two casinos are currently under investigation by AUSTRAC’s Enforcement Team. That is examining potential non-compliance with the country’s Anti-Money Laundering and Counter-Terrorism Financing Act, and Anti-Money Laundering and Counter-Terrorism Financing Rules.
Bad Start Goes Downhill Fast
The auditor’s sobering analysis was delivered in Crown Resorts 2021 annual report to shareholders, published Thursday.
This year was supposed to start brightly for the casino giant, which planned to open its US$1.6 billion Crown Sydney just in time for the New Year celebrations. But its gaming license for Sydney was pulled by the state of New South Wales.
That’s after a regulatory investigation found Crown was guilty of “facilitating money laundering, exposing staff to the risk of detention in a foreign jurisdiction, and pursuing commercial relationships with individuals with connections to Triads and organized crime groups.”
A similar inquiry in Victoria has added tax evasion to the list of complaints. Now Crown’s Melbourne license also hangs in the balance. The flagship Melbourne property generates up to 75 percent of Crown’s profits.
Crown embarked on a series of reforms after losing its Sydney license, including a major leadership reshuffle as it sought to realign its corporate culture with regulators’ recommendations.
Crown has apologized for the failings identified through these various regulatory processes, and we are committed to doing everything in our power to redress them and earn back confidence and trust,” wrote the board in the annual report as it tried to reassure investors.
The board also told shareholders it had negotiated waivers with its bondholders that would provide “a period of time to negotiate with lenders or otherwise refinance the facilities.”
Additionally, it secured an extra A$250 million (US$184 million) debt facility commitment with lenders, which could be used to repay its bonds, if necessary.
Crown Resorts CEO Steve McCann said earlier this month that the company could lease out its properties to other operators should they lose their gambling licenses, although he added this was just one of “a range of scenarios.”
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