YieldReport has previously reported on the trading two subordinated notes issued by Crown Resort and listed on the ASX. Holders of the notes have seen the price savaged in light of a mooted privatisation of the casino and hotel group.
If any party, other than James Packer and/or associates of his Consolidated Press Holdings, were to buy all the ordinary shares of Crown Resorts, the notes’ “change of control” clause would be triggered and an additional 5% per annum would be added to the interest payable on the notes in the event Crown did not redeem them. Such a penalty clause provides a powerful incentive for the group to redeem the notes in the event of a takeover. However, if a party were associated with James Packer or CPH, the change of control clause would not be triggered as the issuing documents or PDS, provides a specific exception to this clause.
A privatisation by Packer has been actively discussed in the media although the company has said little. While a privatisation would typically be good for shareholders as they are mostly conducted at a premium to the current share price, it is viewed as potentially damaging to the interests of note holders because any privatisation is likely to see increased debt levels for the Crown group. An increase in debt levels means greater risk for note holders.