Crown Sydney set to open gaming floor in March as ILGA flags ‘conditional approval’

Owner Crown Resorts is yet to regain suitability to hold a NSW casino licence, but the state’s regulator may finally allow the opening of the gaming floor at Barangaroo within weeks.

Crown Resorts $2.2bn casino in Barangaroo is set to finally open its gaming floor in March, with NSW’s gaming regulator set to give the beleaguered group “conditional” approval.

“It is anticipated that the Authority may permit Crown to commence gaming on a conditional basis in the next few weeks,” an Independent Liquor & Gaming Authority spokesman said.

But the green-light does not mean ILGA believes Crown is now suitable to hold a NSW casino licence.

The James Packer-backed group was deemed unsuitable to hold its gaming licence for Barangaroo following the explosive revelations from the NSW Bergin inquiry that it facilitated money laundering and other organised crime – blowing out the opening of Barangaroo’s VIP gaming floors by more than a year.

“While the Authority has not changed its assessment that Crown is unsuitable to hold a restricted gaming licence until it has addressed the significant issues arising from the Bergin Inquiry, commencement of gaming on a conditional basis will contribute to assisting the Authority to assess Crown’s progress towards suitability,” the ILGA spokesman said.

“At this time, it is not possible to advise when a final determination regarding suitability will be made.”

When the Bergin Inquiry ruled in February last year that Crown Resorts was unsuitable to hold a casino licence, the opening of the Barangaroo casino was delayed until ILGA and its chair Philip Crawford could be satisfied Crown had reformed itself.

Mr Crawford appointed governance and risk consulting firm Kroll to act as “independent monitor” of the reform efforts.

The imminent conditional approval comes after Crown this week agreed to sell its casinos in Sydney, Melbourne and Perth to US private equity giant Blackstone for $8.9bn. Although, analysts say ongoing regulatory risks across three states could potentially derail the deal.

Crown’s shares have yet to hit the offer price of $13.10 from Blackstone, tumbling 1.7 per cent in the past five days to $12.44.

The company revealed on Thursday its loss had deepened 62.4 per cent to $196.3m in the six months to December 31, citing stop/start shutdowns to limit the spread of Covid-19. Meanwhile its revenue from its international VIP program – which Barangaroo was set to become the latest jewel of – has collapsed in the past two years from Australia’s international border closures.

The evaporation of cashed-up Chinese gamblers and other overseas high-rollers led Blackstone to tweak its due diligence on the company, with three of its US gaming experts visiting big RSL pokie venues in southwestern Sydney last month as well as Taranga Zoo and the city’s best golf courses.

Despite the Covid-induced woes, Crown chief executive Steve McCann was confident that the group had turned a corner. Although he said it would take some time for international high-roller revenue to rebound – even after Australia’s international border fully reopens next week.

“The VIP business will be a different business to what it has been historically, given we are no longer dealing with junkets,” Mr McCann said.

“We will be looking to convert the typical high-roller customer to a mass premium customer. That will take some ramping up and we’ll be doing that on a staged basis. Obviously from the time that borders open, we expect to have significant inbound inquiries from some of our international customers.”

Jarden analyst Ben Brownette said on Thursday there he said there “appears some risk to the scheme timetable” with Blackstone.

“Conditions, including but not limited to a material adverse change, the event Crown Melbourne’s licence is cancelled within the two-year supervision period, and in the event the NSW Independent Liquor & Gaming Authority makes a decision Crown Sydney is not suitable to hold a ­casino licence and/or takes action to prohibit Crown Sydney from conducting gaming operations beyond December 31, remain,” he said.

Meanwhile, Credit Suisse analyst Larry Gandler asked Mr McCann if the timeline was “too aggressive”.

“I’m not sure if that was the position of Crown’s board or Blackstone. What’s the rush?” Mr Gandler said.

But Mr McCann – who has a change of control clause in his employment contract, meaning he is in line for an immediate payout of up to $9m, including $5m worth of long-term performance rights that vest if Blackstone emerges as owner – said the scheme followed a “relatively normal timeline”.

“Every scheme varies,” he said.

“Probably the biggest outstanding condition is to get regulatory approval in all jurisdictions. A lot of work has been done, we understand, in that regard. But that approval hasn’t yet been formalised, so they need to work through that with the regulators and that will be something that we will not be in control of.

“But the broader timeline is a relatively standard timeline.”