Unsatisfied with clients’ responses
Crown Resorts is in desperation mode, so much so that is willing to get rid of a chunk of its whales. On Monday, the company announced that after a review of 1,800 local “significant” and VIP high rollers, it has banned more than 250 of them. The reasons: concerns about the clients’ character and their failure to explain how their wealth is generated.
far more significant and comprehensive than we’ve done before”
Crown’s chief financial officer Allan McGregor said that the due diligence reviews were “far more significant and comprehensive than we’ve done before.”
According to a December report by The Sydney Morning Herald, black card holders, Crown’s most elite VIPs, were sent declaration forms and were required to prove that they had assets of more than AU$2.5m (US$1.8m) or that they make more than AU$250,000 (US$182,454) per year. Some high rollers were also told to furnish specifics such as occupation, employer information, and ownership details of their companies.
Crown did not say how much business the purged VIPs contributed to the company’s top and bottom lines.
Crown’s gaming licenses in jeopardy
The jettisoning of the high rollers comes at a time when Crown is trying to do anything it can to prevent its own collapse. The most damaging moment came in February when an independent inquiry concluded that Crown was unfit for a gaming license in New South Wales. As such, its AU$2.2bn (US$1.6bn) luxury Crown Sydney resort, which opened in December 2020, has been without casino gambling.
Crown’s licenses in Victoria (Melbourne) and Western Australia (Perth) are also under threat, as royal commissions are ongoing in both states.
a litany of problems at Crown, including money laundering at its casinos
The 751-page NSW Independent Liquor and Gaming Authority report pointed to a litany of problems at Crown, including money laundering at its casinos, junket ties to organized crime, and poor treatment of staff, which led to the arrest of 19 employees in China for promoting gambling in the country.
The VIP review is an effort to combat money laundering. In May, Crown also agreed to end junkets and introduce cashless gaming. Both measures will help the company better keep track of visitors – high rollers, in particular – and money flowing in and out of its casinos.
Pandemic created further financial issues
In the meantime, Crown has been losing money. The company reported an annual net loss (fiscal year July 2020 to June 2021) of AU$261.6m (US$190.9m), versus a profit of AU$79.5 (US$58m) the year before. FY 2019 profit was AU$402m (US$293.4m). Overall revenue was down to AU$1.5bn (US$1.1bn) from AU$2.2bn (US$1.6bn).
Naturally, much of the decline was the result of the COVID-19 pandemic; Australia has been one of the strictest countries in regard to lockdowns. The company said that its Perth property bounced back nicely once it was able to open back up. Crown Melbourne is currently closed.
To try to slow the bleeding, Crown will not pay a dividend for the first half of the current fiscal year, a deal it made with its bank in exchange for being allowed to push AU$560m (US$409m) in debt that was to set mature out to October 2023.
The company also said it is no longer discussing the possibility of Oaktree Capital buying Crown founder James Packer’s AU$2.3bn (US$1.7bn) stake. This comes after Crown turned down a takeover offer from Blackstone Group and rival The Star withdrew its offer, as it is also facing licensing problems.