Crown And Star Lay Off Workers To Raise Debt During Pandemic - April 2020

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Australia’s two largest casino companies, Crown Resorts and Star Entertainment, have provided information of their survival plans in an attempt to convince investors that they can survive coronavirus shutdowns on their businesses.

They said they laid off some 20,000 workers on Thursday, either temporarily or permanently, and lined up around $760 million in bank loans to survive the coronavirus crisis that has ravaged the industry.

The government confirmed casinos will have to close on March 23, resulting in two of the nation’s biggest employers laying off thousands of workers and shutting their casinos.

The Star said on Thursday, to improve its liquidity position, it had negotiated an additional debt-funding facility with existing partnership banks for AUD 200 million, according to The Guardian. It said about 8,500 employees have stood down, and casuals and contractors have been fired. It will be accessing the work-keeper system of government for qualified workers, it said. The chief executive, Matt Bekier, took a 40 percent drop in salary and the directors cut their salaries by 50 percent.

Crown revealed Thursday that it has now stood down 95% or more than 11,500 of its employees saying “Only employees in business-critical functions remain actively working.”

Those full-time and part-time workers received ex-gratia compensation of two weeks’ salary, while casuals received a lump sum payment of AUD 1,000. In addition, workers were permitted to draw on existing annual and long-service leave. Crown’s chief executive, Ken Barton, and the board took to their remuneration 20 percent cuts.

Crown also said it had lined up facilities for a total of AUD 560 million with its banks and negotiated terms with the three banks financing the construction of its Barangaroo project in order to allow the construction to proceed. “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 $1 billion ($634.38 million) in additional debt facilities,” represented “Crown’s strong financial position” during the disruption period. It has not provided estimates of how long its cash will last.

With the new facility included, The Star said it had AUD 700 million in cash and undrawn debt facilities available. That, it said, would give enough liquidity for an extended shutdown period. Unlike Crown, The Star received estimates of the pace it would burn through cash, saying it would need a total of around AUD 220 million under a three-month shutdown to June 30 and a total of AUD 320 million under a six-month shutdown to September 30.

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

The expansion plans for Star had been at a much earlier stage. However, Crown is at midway through the building of its AUD 2.2 billion high-roller casino and apartment block at Barangaroo, built to cater to China’s VIP gamblers. Many of the luxury units were sold even 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 further blow to the Australian economy will be the slowing down or stopping of large building projects. “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.”