The coronavirus outbreak has foiled James Packer’s plans for the Crown empire as his cash-strapped partner pulls out of a multimillion-dollar deal.
Gaming and entertainment company Melco has shelved their plans to purchase another 10 per cent of Crown Resorts as the severe drop in outgoing Chinese tourism and the shutdown of all Macau casinos begins to weigh on its core business.
“Melco has taken the decision to reassess all non-core investments to be made in 2020,” the company said in a statement.
“As a result of this decision, Melco will not pursue its planned investment in Australia for the second tranche of shares in Crown Resorts Limited.”
While Melco had already bought 10 per cent of Crown, the $880 million deal was on hold while the NSW Independent Liquor and Gaming Authority investigated allegations of money laundering and organised criminal involvement in gambling junkets at its casino.
“This decision reflects Melco’s commitment towards its employees, customers, business partners and other stakeholders and observance of the highest degree of responsibility until such time as the global health emergency and the related travel restrictions that affect a significant part of its customer base are lifted,” the company said.
S&P Global Ratings says that the company is particularly exposed to the shutdown of Macau’s casinos as it has “limited flexibility to absorb a prolonged and severe decline [to] its cash flow” due to the increasing level of capital expenditure required for its Studio City Phase II project in 2020.
Macau’s casinos are heavily reliant on visitation from mainland China, with customers from the mainland accounting for approximately 71 per cent of the island’s visitation in 2019.
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