Crown Resorts' credit rating is being reviewed for a potential downgrade by Moody's following the casino operator's proposal to spin off its international assets and pay out more in dividends.
"The proposed demerger and increased dividend payout ratio will reduce retained cashflow and the company's asset base materially, which is credit negative for Crown and prompted us to put its ratings (Baa2) on review for downgrade," Moody's said on Monday.
Crown, which is majority-owned by billionaire James Packer, last week announced plans to demerge its international investments into a separately listed company.
Crown also is considering creating a new property trust for some of its hotels in Melbourne and Perth, but excluding Crown Towers Melbourne.
The moves would allow Crown to focus on its Australian casinos, high-end London casino Aspinalls and online gambling operations.
Moody's said the demerger of the international assets, which includes a 27.4 per cent stake in Melco Crown Entertainment worth $2.7 billion, would materially reduce Crown's asset base.
MCE operates casinos in Macau and Manila.
Moody's said that a public float of a property trust for some of Crown's hotels in Melbourne and Perth would further diminish Crown's asset base.
However, the float could help Crown fund its $2 billion VIP-casino and luxury hotel development at Barangaroo in Sydney.
Moody's said the divestments would reduce Crown's diversification but this would be partly mitigated by the strength of Crown's core casino operations in Melbourne and Perth.
Crown last week also adopted a new dividend policy to pay 100 per cent of its normalised net profit - up from 65 per cent.
Moody's said the new dividend policy meant that Crown would pay out about $130 million more in dividends.
Furthermore, the dividends that MCE had paid to Crown had been significantly reduced because of the challenging operating environment for casinos in Macau at the moment.
Moody's expects dividends from MCE to recover but the proposed demerger and the new dividend policy would result in Crown having fewer internal funding sources to contribute towards the development of the Sydney casino.
Shares in Crown were 10 cents higher at $13.00 at 1400 AEST.
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