Crown Resorts' bet on Las Vegas Cannery Casino almost over

Crown, 53 per cent owned by Mr Packer, botched an attempt to capture a slice of the US market nearly a decade ago.
In 2007 Crown acquired Cannery Casino Resorts for US$1.75 billion ($2.2 billion), a portfolio of four casinos in Nevada and western Pennsylvania.

“

“

Crown failed to make earnings or profits from Cannery in 2015 but wrote down the value of its investment in the casino group with a USD 61.8M charge which also included legal settlement costs

 

”

However, when the global financial crisis hit, savaging US gambling revenues, Crown was hit with billions of dollars of impairments and has subsequently written off Cannery's value to nil.

It has now emerged Boyd Gaming Corp may be close to agreeing a deal to acquire Cannery, according to a Reuters report on Wednesday, which said a transaction could value the casino operator at between $225 million and $250 million.

Cannery has already hived off The Meadows Racetrack and Casino in Pittsburgh leading the Nevada properties as the main trunk of the deal.

Crown's exposure to Cannery could have been much higher. However, Gretel Packer's decision to back out of the original purchase due to concerns she would be required to release sensitive information to regulators around the Packer's family trusts saw Crown ultimately trim its stake to its current holding of 24.5 per cent.

Crown failed to make earnings or profits from Cannery in 2015 but wrote down the value of its investment in the casino group with a $61.8 million charge which also included legal settlement costs.

Sources close to the company said if the deal with Boyd does proceed, Crown will not receive any of an estimated $US60 million share from the sale with Cannery expected to use the proceeds to repay debt.

Crown was unavailable for comment. Cannery's other owners include US debt giant Oaktree Capital Management and Millennium Gaming.

While the sale would bring a welcome end to the saga, Crown still faces potential repercussions from the Cannery deal.
The Australian Taxation Office in February demanded Crown pay a $362 million tax bill relating to the failed business, split between $250 million relating to tax and interest for the 2009 to 2014 financial years and $112 million in penalties. The casino operator promised to fight the ATO assessment with a possible court challenge if necessary.

Crown and Oaktree are also joint venture holders in the Alon entity which hopes to develop a new $2 billion casino in Vegas by 2018.

However, the casino project appears to be moving slowly with Crown experiencing delays in the sell-down of its 74 per cent stake in Alon.

Sluggish US debt markets have pushed up costs for new borrowers and those that need to refinance and created a poor market for Crown to consider a debt deal which could top $US1 billion ($1.32 billion).

Crown's finance chief Ken Barton said earlier in April that Crown will move on a non-recourse project debt deal when conditions improve with a possible equity sell-down to follow.