Fitch Affirms Australia's Crown Resorts at 'BBB'; Outlook Stable <Origin Href="QuoteRef">CRO.AX</Origin>

(The following statement was released by the rating agency)SINGAPORE/SYDNEY, December 23 (Fitch) Fitch Ratings has affirmed Australia-based gaming operator Crown Resorts Limited's (Crown) Long-Term Foreign-Currency Issuer Default Rating (IDR) and senior unsecured rating at 'BBB'. The Outlook is StableCrown's ratings reflect its strong market position in the Melbourne and Perth markets, driven by its position as the sole casino licence holder in the two Australian states it currently operates - Victoria and Western Australia, the robust performance of its Australian assets, and its stable financial profile. Crown's high-end London casino, Crown Aspinalls, and its 34.3% stake in Melco Crown Entertainment (MCE) result in a sufficiently diversified portfolio. Key risks the company is exposed to are expanding its operations with Crown Sydney, development of a hotel and apartment complex at Queensbridge Melbourne together with the Schiavello Group, and investment in the Alon Las Vegas project. This is amid expectations of lower dividends from MCE. Both Crown and its majority shareholder, Consolidated Press Holdings (CPH) have publicly stated that there is no current proposal for CPH to privatise Crown. Fitch will monitor the situation, and will treat any proposal for a bid for Crown as event risk.KEY RATING DRIVERSStrong Australian Assets: Crown reported a robust 12.6% growth in revenue to AUD3.46bn in the financial year to 30 June 2015 (FY15), aided by Crown Melbourne's strong performance in the main floor and VIP gaming businesses. Crown Perth's stable FY15 performance also supported top-line growth. The Australian assets' normalised EBITDA margin (adjusted to exclude the impact of any variance from the theoretical win rate) was broadly flat in FY15 at 28.6% (FY14: 28.5%) with productivity and efficiency improvements offsetting the shift in business mix to include a higher VIP programme play. The shift in business mix, however, had a greater impact at Crown Perth, where normalised EBITDA margin decreased by 120bp to 26.1% in FY15. Healthy Credit Metrics: Crown generated a robust cash flow from operations of about AUD680.0m in FY15, which enabled it finance 57% of its gross capex (excluding the AUD97.7m proceeds from the sale of property, plant and equipment) of AUD944.6m (FY14: AUD406.9m) and AUD269.5m in dividend payments (unchanged from FY14). Crown's financial leverage (the ratio of gross adjusted debt less cash in excess of AUD144.3m working capital cash to the sum of operating EBITDA and MCE dividends) was 2.39x in FY15 (FY14: 1.50x). Financial leverage remained under the 2.5x level at which Fitch may consider negative rating action, even though FY15 capex more than doubled.Large Capex Pipeline: Crown has a significant pipeline of four projects in the five years ending FY20. These projects are Crown Towers Perth, Alon Las Vegas, Crown Sydney and Queensbridge Melbourne. Crown's pipeline of development projects, when complete, will diversify earnings and its portfolio of assets, and position Crown as a global gaming company with significant scale and diversity.Leverage to Rise: The large-scale expansion without commensurate cash flows from the new projects during the construction phase is likely to result in financial leverage increasing. However leverage is expected to remain within Fitch's guidelines in the lead up to project completions.MCE Performance Under Pressure: The anti-corruption crackdown in China and the global macroeconomic uncertainty resulted in Macao's gross gaming revenues declining by 39% yoy to USD22.64bn in 9M15. MCE's dividends to Crown declined by 44% to AUD52.58m in FY15. Fitch expects MCE's dividends to Crown to further decline in FY16 and FY17 as it is still not clear when Macao's gaming industry will revive. This will result in an increase in Crown's financial leverage in the medium term.KEY ASSUMPTIONSFitch's key assumptions within the rating case for Crown include:- Crown's existing casinos in Melbourne, Perth and London to continue to drive its cash flows till end-FY19,- Operating EBITDAR margin will be around 25% during FY16 to FY19,- No change to dividend policy of annual dividend payout of 37 cents per share (AUD269.5m).RATING SENSITIVITIESNegative: Future developments that may, individually or collectively, lead to negative rating action include:- Net adjusted debt (excluding working capital cash) to EBITDA increasing above 2.5x on a sustained basis- Significant negative regulatory action or additional material funding of investments (for the Alon Las Vegas and Crown Sydney projects) that could lead to an increase in leveragePositive: Future developments that may, individually or collectively, lead to positive rating action include:- Deleveraging so that net adjusted debt (excluding working capital cash) to EBITDA falls below 1.75x on a sustained basisNo positive rating action is anticipated over the next 24 months as the company completes major projects.FULL LIST OF RATING ACTIONSCrown Resorts LimitedLong-Term Foreign-Currency IDR affirmed at 'BBB'; Outlook StableSenior unsecured rating affirmed at 'BBB'Contact: Primary AnalystNandini Vijayaraghavan, CFADirector+65 6796 7216Fitch Ratings Singapore Pte Ltd6 Temasek Boulevard#35-05 Suntec Tower FourSingapore 038986Secondary AnalystKelly 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; Leni Vu, Sydney, Tel: +61 2 8256 0304, Email: leni.vu@fitchratings.com.Additional information is available on www.fitchratings.comApplicable Criteria Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 17 Aug 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869362Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr _id=997353Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=997353Endorsement Policy https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&det ail=31ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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