Crown stands down 95% of its staff, secures USD 634.38 million in debt

The Star and Crown lay off 20,000 staff, raise $760 M in debt funding to weather crisis

Due to coronavirus curbs, Australia’s top two casino operators said on Thursday they have laid off about 20,000 staff either temporarily or permanently and lined up about $760 million in bank credit.
2020-04-16
Reading time 2:40 min
The Star said on Thursday it had executed an additional debt-funding facility for AUD 200 million to strengthen its liquidity position, and it stood down about 8,500 staff and terminated casuals and contractors. Both companies' CEOs and directors have taken pay cuts. Crown Sydney hotel resort remains on track for completion by the end of the year.

Australia’s two major casino groups, Crown Resorts and The Star Entertainment group, have released details of their survival strategies in a bid to reassure investors they can weather the shutdowns of their businesses due to the coronavirus. They said on Thursday they have laid off about 20,000 staff either temporarily or permanently and lined up about $760 million in bank credit to survive the coronavirus crisis that has battered the industry.

The government announced casinos had to close on 23 March, resulting in two of the nation’s biggest employers laying off thousands of staff and closing their casinos.

The Star said on Thursday it had executed an additional debt-funding facility with existing relationship banks for AUD 200 million to strengthen its liquidity position, The Guardian reports. It said it has stood down about 8,500 staff and terminated casuals and contractors. It would access the government’s jobkeeper scheme for eligible employees, it said. The chief executive, Matt Bekier, had taken a 40% pay cut and directors had cut their fees by 50%.

Crown announced on Thursday it has now stood down about 95% or more than 11,500 of its employees. “Only employees in business-critical functions remain actively working,” the company said. Ex-gratia payments of two weeks’ pay were given to those full-time and part-time employees, while casuals were given a lump sum payment of AUD 1,000. Staff were also allowed to draw down on existing annual and long-service leave. Crown’s chief executive, Ken Barton, and the board have taken 20% cuts to their remuneration.

Crown also said it had lined up facilities with its banks for a total of AUD 560 million and had agreed terms with the three banks funding the construction of its Barangaroo project to allow building to continue. “This facility [for $450m] remains subject to final credit approvals and long-form documentation,” Crown said.

It said its current cash balance of “approximately AUD 500 million, together with its ability to secure over $1bn ($634.38 million) in additional debt facilities”, reflected “Crown’s strong financial position” during the period of disruption. It did not provide estimates of how long its cash would last.

Including the new facility, The Star said it had available cash and undrawn debt facilities of AUD 700 million. That, it said, would provide sufficient liquidity for an extended period of shutdown. Unlike Crown, The Star provided estimates of the rate it would burn through cash, saying it would need about AUD 220 million in total under a three-month shutdown to 30 June and AUD 320 million in total under a six-month shutdown to 30 September.

Those estimates include operating expenses, drawdowns by employees on accrued annual and long-service leave entitlements, payables offset by receivables, interest payments, and capital expenditure payments, Star said.

Star’s expansion plans were at a much earlier stage. Crown, however, is midway through the construction of its AUD 2.2 billion high-roller casino and apartment block at Barangaroo, which is designed to cater to VIP gamblers from China. Many of the luxury units have also been sold to offshore investors.

Crown intends to continue construction of the Crown Sydney project as planned and, absent any further delays arising from the impact of Covid-19, remains on track for completion of the Crown Sydney hotel resort by the end of the year,” Crown said in the statement to the ASX

A slowdown or halting of major construction projects would be a further blow to the Australian economy. “Currently, there are over 1,300 people employed on the construction of Crown Sydney, which is expected to be maintained until completion,” the company said. “In the lead-up to the full opening of Crown Sydney, Crown expects to recruit over 2,000 people to work in the hotel resort.”

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