Australian Crown scraps Las Vegas casino project

Crown, owned by billionaire James Packer, along with Texas developer Christopher Milam and private equity firm York Capital Management, had planned to build the tallest tower in Las Vegas as part of the casino complex and 5,000-room hotel project.

Crown CEO Rowen Craigie said following a strategic review it had stopped making payments to the vendors of the former Wet ’n’ Wild site at the northern end of the famed Las Vegas Strip.

"The recent upheavals in world credit markets have made it increasingly difficult for Crown and its partners to develop a commercially viable project on what remains an attractive location on the Las Vegas strip," Craigie said in a statement.

The meltdown in the U.S. sub-prime mortgage market last year triggered a global credit squeeze which still persists. Crown said it would write off us$ 42 million investment in the project. "The question here is they’ve burned some money on this deal. What about other equity stakes that they have, smaller ones - there may be a risk that something similar might happen, such as with Fontainebleau," said Akshay Chopra, an analyst with Karara Capital.

Crown owns 19.6 percent of privately-held Fontainebleau Resorts, which is building a new us$ 2.9 billion casino resort in Las Vegas and completing a renovation of its landmark Fontainebleau Miami Beach Hotel.

It also owns two casinos in Australia and last December bought Cannery Casino Resorts for us$ 1.75 billion, giving it three casinos in Las Vegas and a racetrack in Pittsburgh. In addition, it has a casino joint venture in Macau and nine Canadian casinos.

Shares in Crown fell as much as 2 percent after the announcement, but rebounded to trade down 0.4 percent, valuing the group at us$ 6.6 billion, in a broader market that was down 0.1 percent. Crown’s decision followed reports at the end of March that the development group had failed to find another equity partner to meet its lenders’ demands.

Fund managers said while it was disappointing that the project was not going ahead, it was not a big surprise in the current environment.

"It’s indicative of the fact that in part credit markets are difficult at the moment. It’s also indicative of the fact that in a slowing growth environment, the gaming sector does carry some short term risk, given its exposure to discretionary spending," said Angus Gluskie, a portfolio manager with White Funds Management, which owns a small stake in Crown.