Crown Buyout, Wynn Leaseback and Sands Junk Rating

Crown Resorts has accepted an $8.9 billion takeover bid from Blackstone, a private equity firm. Just days after the news broke, the Australian casino company reported a loss of $141 billion for the last six months of 2021. In other casino news, a credit agency downgraded Las Vegas Sands, while Wynn Resorts negotiated its first real estate sale.

Plagued by regulatory issues and Australia’s COVID restrictions, Crown Resorts eventually accepted Blackstone’s takeover offer. (Image: William West/Getty)

It’s a tough environment for casinos. Borrowing costs are rising due to rising global interest rates. The pandemic is causing planning and staffing challenges. But in times of uncertainty, some see risks, while others see opportunities. In other words, uncertainty drives buyout activity.

The redemption of the Crown was only a matter of time

There has been a flurry of offers in the casino sector. Last year, Bally’s bought the Tropicana, its first Las Vegas property. MGM Resorts has purchased the Cosmopolitan. Hard Rock International took over the Mirage property from MGM. The takeover of Crown Resorts, however, was more risky than most.

Crown has struggled in recent years. Initially, his problems were regulatory. A number of its Australian casinos have been accused of aiding money laundering, putting their licenses at risk. Meanwhile, strict pandemic measures have crippled the company financially. Last fall, Crown’s auditor issued a warning about its ability to continue in business.

In 2021, Crown rejected takeover offers from Blackstone and a rival casino company, Star Entertainment Group. Blackstone recently softened its takeover offer and Crown’s board unanimously accepted the offer. Crown shareholders will receive $13.10 per share under the $8.9 billion all-cash deal.

Sands bonds deemed junk as Vegas casino sale OK

Blackstone isn’t the only private equity firm buying casinos. Last March, Apollo Global Management purchased the Sands properties in Las Vegas for $6 billion. Last week, Nevada regulators approved the takeover. Although, because of Apollo’s background, it wasn’t a slam dunk.

Sands properties in Macau rated higher by credit rating agency.risk
Architectural Digest named the Venetian Macau one of the world’s most beautiful casinos in 2017. Now, Sands properties in Macau are considered higher risk due to the region’s slow recovery. (Picture: Sands.com)

Under Leon Black, Apollo Management was responsible for the biggest casino failure in the world. It’s a regulator’s worst nightmare. Even though Black is no longer with Apollo, he was the “elephant in the room” during the Nevada Gaming Commission licensing hearing. In fact, much of the audience was devoted to Black and the bankruptcy of Caesars Entertainment.

While Sands received good news from Nevada regulators, he received bad news from the Wall Street credit rating agency. On Wednesday, S&P Global Ratings downgraded Las Vegas Sands’ credit rating to junk based on Macau’s stalled recovery. The downgrade will force Sands to pay higher interest rates when it borrows money.

Wynn is selling Encore Boston Harbor but will re-let the property.
Wynn Resorts has completed its first sale-leaseback agreement, selling the Encore Boston Harbor property for $1.7 billion. (Image: Wynn Resorts)

Although overshadowed by the scale of the Crown Resorts takeover, Wynn Resorts has achieved something of a sale. In a pattern that is quickly becoming the norm, Wynn is selling its Encore Boston Harbor property to a real estate investment trust. Wynn will lease the property, continuing to operate the casino and hotel. Under the terms of the sale, Wynn will receive $1.7 billion and pay Realty Income about $100 million a year in rent. The 30-year lease comes with a 30-year renewal option.

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