Crown Resorts Limited is Australia’s largest gaming and entertainment group and, in recent years, seems to have become a magnet for trouble. Aside from the economic buffeting that COVID-19 has visited upon its fortunes, the company has also found itself becoming the subject of numerous governmental investigations.
Now, a new crisis has befallen the beleaguered corporation as it has been placed on negative watch by Fitch Ratings.
Negative reasons
The sequence of events that led to the rating change began with a flurry of news reports that implicated the company in a money-laundering operation at its Perth and Melbourne casinos. Questions also arose around the company’s apparent inability to address a number of its China-based employees being arrested for being linked to organised crime.
When the NSW government caught wind of these allegations, it promptly initiated an investigation into Crown’s suitability to hold a license in the state. At the time around September 24th, 2020, Crown’s Fitch rating grade was at BBB (stable).
Unfortunately for the casino giant, the end of October brought more ill tidings with Fitch’s new assigned rating of BBB (negative) because of two new investigations.
The first new inquest is courtesy of the Australian Transaction Reports and Analysis Centre and regards possible non-compliance by Crown Melbourne with anti-money laundering laws. The second investigation was launched by the Victorian Commission for Gambling and Liquor Regulation that has demanded information on Crown Melbourne’s junket operations.
Fitch Ratings
Fitch Ratings is a London and New York-based international credit rating agency. It was founded in 1914 by John Knowles Fitch and is one of the three major companies in its field alongside Standard & Poor’s and Moody’s.
Fitch assigns grades for publicly traded companies around the globe. These ratings are employed by investors to calculate which investments are more likely to produce a positive return. The ratings are determined by several factors including debt, positive cash flow, and internal governance.
Fitch Investment Grades
Fitch provides two types of grades, namely investment, and non-investment. The investment category is used for businesses that are determined to be a good investment. Meanwhile, the grades in the non-investment category are assigned to undesirable investment opportunities.
Investment Grades
- AAA – Exceptionally high quality.
- AA – High quality, but more risk than AAA companies.
- A – Low risk, but slightly more vulnerable.
BBB – Low expectation of default. This is the current rating for Crown Resorts. If they drop one spot, they’ll be considered a bad investment.
