CWN (ASX) Packer snaps up another 3% of Crown

Originally posted by sergeant ↑

Talk out there from Credit Suisse of a capital raising in CWN. Rather convoluted story, but apparently a sell down of Alon (Los Vegas) by CWN could be done at a level that prices Alon at $1.6bn rather than $1.9bn, which could put them over the 2.5x debt to EBITDA, and which may jeopardise their BBB rating.
They add that if Macau underperforms, the Australian casinos underperform, and Nobu underperforms then they may feel more comfy raising $450 mill in CWN.
Thats alot of IF's but CS have attracted a bit of interest in their call, with the share price at sub $11. Oh, that's the other thing. Apparently, Packer buying 3% at $12 is another piece of evidence that a cap raising is coming, because he doesn't want to be diluted down. Why doesnt he tin up in the placement instead, I hear you say? Well, apparently, to place to a related party, such as JP requires shareholder approval, so its easier if JP just pays $22-25 mill more than everyone else to get set. I wonder if Perpetual, who sold their stock to JP at $12, will be buying back in any placement.... If I sound cynical, its probably because I am.

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Further to my earlier email, this latest news, if true, would nicely take care of the Credit Suisse concerns.
For quite some time now, the market has been shorting this stock in the expectation of a capital raising to ward off any danger of breach of BBB rating covenants, namely Interest/EBITDA which may have moved above 2.5x under certain scenarios. By selling off some of the best performing assets, CWN are cashing in in order to fund the development of Sydney, Las Vegas and any further deterioration of Macau (which i think is bottoming anyway, but is clearly a weight on the market currently).
The fundamental point, now, however, is that those shorts will be feeling a bit exposed to the market, especially when much of the reason for being short might actually have vanished before their eyes.
I suspect this might generate a decent rally even from these levels of $12.00 plus.

Packer snaps up another 3% of Crown, page-27