Crown’s Vegas bet

Crown

As Deutsche Bank and Credit Suisse get down to the serious business of arranging project financing for James Packer’s $4 billion Alon property in Las Vegas, it is believed Packer’s Crown Resorts is eyeing third party equity in the project.

The extra equity funding, which could come from either a strategic or institutional investor, could see Crown’s stake in the entity created for the project — Alon Leisure Management — fall from its current level of about 73 per cent. Crown’s move to fund the project via project financing rather than on its own balance sheet is in line with its previous strategy in developments which it does not own outright.

Melco Crown, its 34 per cent owned Asian gaming joint venture with Lawrence Ho, went down the project finance route for its 60 per cent owned Studio City casino ­resort in Macau, which is due to open on October 27.

Importantly it means the debt on the project, which could be renegotiated if Studio City receives far fewer tables for the project than it was expecting from the Macau government, is non recourse to Melco Crown.

Crown has also learnt its lesson from its previous costly US forays.

Writedowns and charges tied to five Las Vegas investments, including the disastrous Fontainebleau hotel, came to $US1.37bn seven years ago.

It comes as some bond investors are reportedly nervous about the 47 per cent increase in Crown’s debt last year to $2.5bn at a time when growth in the Macau gaming market has hit the wall.

It is little surprise Deutsche got the gig on the Alon deal given it has had a long-term debt advisory relationship with Melco Crown. It also didn’t hurt that Crown’s new chairman Rob Rankin was formerly one of the bank’s most senior executives.

Expect Deutsche and Credit Suisse to go to the US debt market before the end of the year on financing for Alon, which could see the issue of a high yield bonds as Melco Crown did on Studio City.

The partners on the Alon project, Crown, Oaktree Capital Management and former Wynn Las Vegas president Andrew Pascal, have already committed about $100m in equity.