Crown Resorts Initiates Huge Layoffs & Debt Funding
Australia’s largest casino company Crown Resorts has initiated a huge round of layoffs and a new debt funding round in response to COVID-19. The casino operator this week has announced an unprecedented series of layoffs, with early indications that about 20,000 staff have either been temporarily or permanently laid off.
On top of the massive round of layoffs, the country’s biggest operator told shareholders they have lined up around $630 million in emergency debt funding from the Australian government. This enormous financial aid package is part of the government debt relief program to rescue businesses from the economic fallout of the Coronavirus pandemic.
This pandemic has been particularly bad for the country’s gambling industry, and early indications show that the gambling sector is one of the worst-hit throughout the entire economy. The government restrictions placed on casinos across the country have been devastating, with complete shutdowns following severe restrictions on the movement of people to stop the spread of the disease.
The mass layoffs and incursion of government debt are not unique to Crown Resorts, as the spread of the pandemic accelerated and land-based casino activity ground to a halt, swathes of operators have had to enact similar mitigating actions as Crown Resorts. The number two casino in Australia, Star Entertainment Group, has laid off 8,500 staff and taken on a $120 million credit line to rescue their balance sheet. Similar measures have been taken by the largest operator in neighboring New Zealand, where the firm has laid off thousands of staff and taken on huge debt to save them from insolvency.
Australia Looks Destined for First Recession in Three Decades
Like the rest of the world economy, Australia is suffering terribly in terms of the negative growth forecasted for its gross domestic product. With a global recession looking more and more likely with each passing day, Australian businesses are already taking emergency measures to preserve their future viability once the economy finally recovers.
The latest round of layoffs across the gambling industry comes as the country looks destined for a recession as huge portions of the economy have come screeching to a halt. This week Crown Resorts announced it had secured over $630 million in order to steady the ship, these low-interest loans from the Australian government will go towards general operating costs, but also to fund ongoing construction projects in Sydney, of which nearly $300 million of the total debt is destined.
Ken Barton, the Chief Executive Officer of Crown Resorts gave his positive thoughts on the outcome, which will surely work favorably for Crown as they seek to establish long-term confidence in their financial position.
As a result of today’s announcement, Crown is well placed to withstand an extended period of closure.Ken Barton, Chief Executive Officer, Crown Resorts Ltd.
But just as this crisis is beginning to plateau, and economists, politicians, and health officials are frantically looking for reassurance in the data that their mitigation measures are having a positive effect on the overall outlook. Looking ahead in a similar fashion, Crown Resorts announced that they will be needing to hire around 2,000 staff at their new Sydney venue once the restriction measures are lifted.
The price of Crown Resorts shares has taken a tumble, of course, investors are reacting to the huge loss in expected revenues that the firm has been hit with. In solidarity with the enormous financial hardship that is being felt by all staff at the firm during the time of crisis, the company’s top management team announced that they too will share some of the burdens. Upper-management at Crown Resorts has agreed to a 20% pay cut. Unlike many other firms, Crown Resorts will pay its annual dividend, as they seem fully prepared to absorb the hit being dealt by COVID-19.
In light of the government shutdown, there are serious cash costs to deal with. Under the current conditions, Crown Resorts are expected to be losing around $20 million a month from the shutdown of their non-essential Melbourne and Perth locations. Under the government furlough scheme, which has been a popular quantitative easing tool of global governments around the world – an estimated $80bn is being used to pay the wages of six million people.
Whilst the latest measures are taken by Crown Resorts have been terrible for those unfortunate employees to lose their job, the worst is yet to come according to most financial analysts. There has been a huge demand shock for most global commodities, from oil to gambling, the world is slowly coming to terms with massive surges in unemployment, huge restrictions on basic social liberties and unpredictable timeline of when things will return to normal.