Packer's $307m Fountainbleau loss no surprise

The Australian: Teresa Ooi | June 12, 2009

JAMES Packer's $US250 million ($307m) loss from the bankrupt Fountainbleau Las Vegas Resort had been expected by the market, according to several analysts.

Crown shares fell 10c to close at $7.60 yesterday after Fountainbleau filed for chapter 11 bankruptcy protection two days ago. Deutsche Bank has retained its buy rating on Crown, as the stock is now trading at a 7 per cent discount to Deutsche's valuation of $8.30 a share. Crown decided to write down the remaining $US22m debt in Fountainbleau by the end of this financial year. Deutsche analyst Mark Wilson said: "We view the (debt writedown) as a minor negative, albeit already appreciated by the market." He said Crown had already written off the value of its equity investment in Fountainbleau -- $US250m."The company has no obligation nor current intention to contribute any further equity or debt to the project or participate in any restructuring under any bankruptcy arrangements," he wrote in a note to clients yesterday.

"This would bring total asset writedowns to $814m and outstanding investments include MPEL (the Melco-Crown joint venture) $US500m, Cannery casino in the US $294m, Gateway debt (a Canadian-Crown JV) $166m, Harrah's (a US casino company) $72m, Aspinalls (a British casino company) $40m and Betfair $17m." Mr Wilson said that Mr Packer had had a tough time with his casino investments, with most of the writedowns disclosed in February.

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Don Quixote Note: See Jan 27, 2008 Posting of: Casinos that want to upgrade to capture more of gamblers' money usually pay the costs. In B.C., taxpayers take the hit. (excerpt below)

But last month Australia's biggest gambling operator and a bank based there combined to buy Gateway Casinos, which has seven casinos in B.C. An Australian paper reported the bank liked the opportunity because B.C. was one of the only places in the world that offered casino operators a "free ride."

"A very nice kicker to this whole transaction is a dynamic that has been set up at the government level, whereby any capital expenditure you spend on your casinos is refunded by the government," a bank spokesman said.

"So there is, specific to this region of the world, a very attractive environment for a casino operator." Casinos that want to upgrade to capture more of gamblers' money usually pay the costs. In B.C., taxpayers take the hit.