Global debt investor Oaktree Capital Management has revised its offer to finance a shares buy-back for casinos operator Crown Resorts (ASX: CWN).
In April, Oaktree proposed providing debt finance of around $3 billion for Crown to buy back some, or all, of its shares held by James Packer’s family company Consolidated Press Holdings (CPH).
CPH currently holds a 37% stake in the business.
Under a revised proposal reported by Crown on 15 June, Oaktree proposes providing a $3.1 billion debt facility in two tranches: a $2 billion private term loan and a $1.1 billion loan convertible to new shares to be issued by Crown.
Oaktree proposes that the facility would have a term of seven years with interest of 6% for the first two years rising to 6.5% from the beginning of the third year.
The convertible component of the facility would give Oaktree the option of converting the $1.1 billion tranche into new shares at a price of $13-a-share at any time after the first 12 months of the facility and in other specified circumstances provided that the Crown share price was above $13 (based on a 30-day volume weighted average price).
The number of new shares to be issued to Oaktree would be capped at a 9.99% stake in Crown. The remainder of the convertible component would require cash payment by Crown.
Any selective buy-back of Crown shares held by CPH would be subject to Crown shareholder approval excluding CPH and its associates from voting.
Crown said its board had not yet formed a view on the revised Oaktree proposal.
On 17 May, Crown announced it had rejected a revised indicative $9 billion acquisition offer from the world’s largest private equity firm The Blackstone Group. Crown is, however, still considering a merger proposal from rival The Star Entertainment Group (ASX: SGR).
Crown said in its 17 May announcement that its board had unanimously concluded that the $12.35-a-share Blackstone offer undervalued the business.
Since then, a royal commission into Crown in Victoria has been told the company may have underpaid $200 million in state gambling taxes, failed to properly investigate the arrest of employees in China, flouted laws prohibiting the use of credit and debit cards in casinos and failed to take steps to protect chronic gamblers.
These revelations at the continuing Victorian inquiry cast doubt on whether Crown can be considered suitable to operate its Melbourne casino and to begin gaming operations at its new Barangaroo, Sydney, facility.