Fitch: Crown's Dilution of MCE Stake Enhances Capex Funding Ability <Origin Href="QuoteRef">CRO.AX</Origin>

(The following statement was released by the rating agency)SINGAPORE/SYDNEY, May 06 (Fitch) Australian casino company Crown Resorts Limited's (Crown, BBB/Stable) agreement to sell 155 million ordinary shares in Melco Crown Entertainment (MCE) back to the Macau-based gaming company will enable Crown to deleverage and thus enhance its ability to execute its sizable expansion plans.The USD800m (AUD1.05bn) proceeds from this privately negotiated transaction and the AUD168m special dividend that MCE paid Crown in March 2016 will enhance Crown's financial flexibility. This will help Crown as it expands and lower its net financial leverage (ratio of gross adjusted debt less cash in excess of working capital cash to the sum of operating EBITDA and MCE dividends). Fitch estimates that Crown's pro forma net leverage based on its performance during the twelve months ended 31 December 2015 and after taking into account the proceeds from the share sale and special dividend from MCE, would have been lower than 1.5x; an improvement from 2.3x at 30 June 2015. Crown has a significant project pipeline in the five years through to the financial year ending 30 June 2020 (FY20), which includes development of Crown Towers Perth, Alon Las Vegas, Crown Sydney and Queensbridge Melbourne. Fitch expected leverage to rise during the construction phase, but to remain below 2.5x, the level at which Fitch may consider negative rating action, in the lead up to project completions. This transaction is likely to lower the peak in Crown's projected leverage as it completes these expansions. This moderation will, however, be a function of Crown's decision to undertake shareholder distributions.Crown's stake in MCE will decline to 27.4% from 34.3% after this transaction. Crown's stated intent of maintaining a significant stake in MCE after the partial stake sale along with its UK property, Aspinalls, add an element of geographic diversity to Crown's portfolio, which is focussed on Australia.Crown's dilution of its stake in MCE is timely due to the challenging conditions in Macao and the potential cannibalisation by new resorts. Las Vegas Sands Corp (BBB-/Stable), Wynn Resorts Limited (NASDAQ:WYNN) (BB/Stable) and MGM China Holdings, Ltd (BB/Stable), which is the Macao subsidiary of MGM Resorts International (B+/Positive), are due to open new resorts in the territory in 2H16, which could result in MCE's Studio City losing market share.Contact:Nandini Vijayaraghavan, CFADirector+65 6796 7216Fitch Ratings Singapore Pte Ltd6 Temasek Boulevard#35-05 Suntec Tower FourSingapore 038986Kelly Amato, CFAAssociate Director+61 2 8256 0348Committee ChairpersonVicky MelbourneSenior Director+61 2 8256 0325Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com.Additional information is available on www.fitchratings.comRelated Research: Fitch Affirms Australia's Crown Resorts at 'BBB'; Outlook Stable /a ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.