Crown (ASX:CWN) share price lower despite Oaktree proposal

Crown has received yet another proposal…

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The Crown Resorts Ltd (ASX: CWN) share price is trading lower on Tuesday despite the release of an announcement.

At the time of writing, the casino and resorts operator’s shares are down 1% to $12.12.

What is happening?

This morning Crown revealed that Oaktree Capital Management has come back with an improved offer.

This follows its unsolicited, preliminary, non-binding and indicative proposal in April to provide a funding commitment of up to ~$3 billion to Crown via a structured instrument. The proceeds were to be used by Crown to buy-back some or all of the Crown shares which are held by James Packer’s Consolidated Press Holdings on a selective basis.

Today, Crown revealed that Oaktree has now revised its proposal and is offering a $3.1 billion facility consisting of two tranches. This comprises a $2 billion private term loan and $1.1 billion loan convertible into new shares to be issued by Crown. Once again, it proposes that the proceeds would be used to fund a selective buy back of Consolidated Press Holdings’ shareholding in Crown.

What are the terms?

Crown notes that the term of the proposed facility is seven years with a coupon of 6% per annum for the first two years and then 6.5% per annum for the remainder of the term.

In respect to the convertible component of the facility, it would give Oaktree the ability to convert the $1.1 billion tranche into new shares in Crown at a strike price of $13.00 in specified circumstances. This includes at any time after the first anniversary of the facility provided that the Crown share price is above $13.00 based on a 30-day volume weighted average price.

Furthermore, the number of new Crown shares which would be issued to Oaktree upon conversion would be capped so that Oaktree would hold 9.99% of the total number of Crown shares on issue. The remaining part of the convertible component would be cash settled by Crown.

What now?

The release explains that the Crown Board has not yet formed a view on the merits of the revised Oaktree proposal.

As a result, it has advised shareholders that they do not need to take any action in relation to the proposal at this stage. It also warned that there is no certainty that the proposal will result in a transaction.

Crown is also still considering a merger proposal from rival Star Entertainment Group Ltd (ASX: SGR).

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