The Crown Resorts Ltd (ASX: CWN) share price is edging higher in early morning trade, up 0.5%.
This comes after Moody's Investors Service maintained Crown's current issuer credit rating of Baa3. However, Moody's did revise the rating outlook to negative. Moody's initiated the review for downgrade in November.
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How did Moody's make its credit rating call on Crown Resorts?
Commenting on the decision to maintain Crown's current Baa3 rating, Moody's analyst Maadhavi Barber said:
The rating confirmation reflects our view that Crown has good potential to maintain its investment grade credit profile, and is willing and able to remediate shortcomings identified by the Bergin Inquiry in New South Wales, as well as any additional shortcomings that may be identified by regulatory investigations in other states.
Explaining why Moody's opted for a negative rating outlook for Crown, Barber added:
[T]he remediation steps required for Crown to reach suitability to hold its Sydney restricted gaming license are far-reaching and complex, which is why we have retained the negative rating outlook.
You're likely aware of the lengthy list of issues facing Crown Resorts. Among them, the company was found unsuitable to hold a restricted gaming license in Sydney. That's kept Crown from starting its gaming operations at its new casino. However, the company still has the potential to gain a new license down the road.
With Victoria and Western Australia also investigating Crown's suitability to run its Casinos in those states, the pressure on management has mounted. Yesterday, director John Poynton became the latest member of the Crown board to resign. This follows the resignation of CEO Ken Barton back on 15 February.
Moody's added that it "expects Crown's gaming facilities in Melbourne and Perth will remain open and generate revenue". This is because neither Victoria nor Western Australia will want to damage their economies or employment levels.
Moody's also forecast that "Crown's financial metrics will likely improve as earnings gradually recover, and debt is paid down."
On the importance of proper Environmental, Social and Governance (ESG) practices, Moody's said "governance risk considerations are a key factor in today's rating action."
Share price snapshot
Crown's shares are down 1% over the past year compared to a 7% gain on the S&P/ASX 200 Index (ASX: XJO). Taking note that this time last year, ASX shares had already come under heavy selling pressure due to the pandemic.
Year-to-date the Crown Resorts share price is up 3%.
