Australian casino developer Crown Resorts Ltd plans to use the proceeds from selling its remaining stake in Melco Resorts and Entertainment Ltd to reduce the company’s debt. The announcement was made on Tuesday in a filing to the Australian Securities Exchange.
“Crown Resorts is expected to generate net proceeds of approximately US$987 million or AUD1.34 billion (equivalent to US$5.97 per Melco Resorts ordinary share and US$17.91 per Melco Resorts American depository share) which will initially be used to reduce Crown Resorts’ net debt,” the firm stated.
Crown Resorts’ net debt position at the end of 2016 was AUD1.77 billion, excluding working capital cash of AUD166.9 million. It consisted of total debt of AUD2.26 billion and cash of AUD492.1 million, according to the firm’s latest financial report.
Crown Resorts’ disposal of its remaining stake in Melco Resorts was announced on Monday. Nasdaq-listed Melco Resorts owns and operates casino properties in Macau and in the Philippines.
Melco Resorts was originally established in 2004 as a joint venture between Hong Kong-listed Melco International Development Ltd and a firm that eventually became Crown Resorts. The venture’s name changed from its former moniker Melco Crown Entertainment Ltd last April, following a series of sell downs by Crown Resorts.
At the start of May 2016, Crown Resorts – alongside Melco International, controlled by casino entrepreneur Lawrence Ho Yau Lung – each held a stake of 34.3 percent in the joint venture. But in early May 2016, Crown Resorts, controlled by James Packer (pictured), said it was cutting its holding in the firm to 27.4 percent. Further sell downs by Crown Resorts occurred in December, ultimately reducing its holding to 11.2 percent.
In its Tuesday release, Crown Resorts made no reference to why it decided fully to dispose of its stake in Melco Resorts. The deal involves Melco Resorts repurchasing Crown Resorts’ remaining shareholding in the firm, using the proceeds from an offering – backed by several investment banks – of American depository shares and ordinary shares.
In a separate filing – to the Hong Kong Stock Exchange – Melco International said the overall operation “intended to ensure an orderly disposal” of Crown Resorts’ remaining interest in Melco Resorts and to “eliminate or minimise any potential negative impact” that might otherwise be caused by an on-market disposal.
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”While we recognise we have more work to do, we welcome ILGA’s indication today that Crown’s reform implementation is well-advanced towards suitability to operate gaming at Crown Sydney”
Executive chairman of Australian casino operator Crown Resorts