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Packer's Debts $2b and yet ticking

( November 3, 2013, Colombo, Sri Lanka Guardian) Kerry Packer was notorious for losing millions of dollars on the gaming tables of the world. But since his father's death in 2005, James Packer has been making far bigger, billion-dollar bets, building and buying casinos around the world. And so far every one has lost.

The total damage to Mr Packer and his shareholders in Crown Limited, according to tonight's ABC1's Four Corners, comes to nearly US$2 billion. The bulk of this money, around US$1.3 billion, was lost in Las Vegas, but there have also been setbacks in Canada, the UK, Russia, Singapore and Macau.

All Mr Packer's bets in Las Vegas were made at a time when America's sub-prime mortgage disaster was already under way and the global financial crisis was brewing.

It was in July 2007 that two Bear Stearns hedge funds in New York went spectacularly bust from which Mr. Packer is yet to recover. So how smart was it to be buying back then? "It wasn't smart," says Randy Fine, who runs Fine Point Group, a leading casino consulting firm in Las Vegas. "It was a good time to be receiving the billions of dollars. I don't think it was a good time to be handing out the billions of dollars.

"He [James Packer] bought at the peak, there's no question about that. He wasn't the only one though. Many others got beaten up pretty deeply as well." Mr Packer's and Crown's biggest bet, worth US$2.7 billion, was to buy Cannery Casino Resorts, which owns three suburban casinos in Las Vegas and one in Pennsylvania. Announced just as the markets began to slide, it was seen to be expensive even then.

So was it ever a good deal? "No," says Randy Fine bluntly. But it soon got much worse.

Las Vegas was hit by the worst downturn in its history, which has seen revenues on the Strip decline for 19 months in row. The city now has the highest home foreclosure rate in the USA, one of the steepest declines in house prices, and one of the highest rates of unemployment, with one in eight people out of work.

The Cannery deal had to be canned at a cost of almost $500 million. But it would have been worse had the purchase gone ahead. By then, shares in Las Vegas casino companies had fallen, on average, by almost 90 per cent. And some of the biggest operators, like Las Vegas Sands and MGM, were on the brink of bankruptcy.

So, too, were some of the other companies and projects Mr Packer and Crown had invested in. Station Casinos, the largest suburban casino operator in Las Vegas, filed for Chapter 11 bankruptcy earlier this year, forcing Crown to write off its entire US$242 million investment. Crown's US$172 million investment in Harrah's, the world's largest casino company, which owns Caesar's Palace and Paris Vegas, has also been written off, even though Harrah's has so far managed to stay solvent.

Mr Packer's and Crown's 20 per cent investment in the new $US2.9 billion Fontainebleau Las Vegas has also come unstuck. The company building the huge luxury resort at the run-down north end of the Las Vegas Strip went bankrupt in June after its bankers pulled the plug. The half-finished shell, which will take an estimated $US1.5 billion to complete, is now up for sale. Once again, Packer and Crown have written off their entire $333 million investment.

So why did it all go wrong? Blame the global financial crisis. Fewer people are now coming to Vegas and those who come are spending less, so winnings and hotel revenues have fallen by 20 per cent. But blame the casino and apartment developers, too.

Just about everyone was betting that revenues would continue to rise as they have done for the last 20 years. And they were backing these debts by borrowing billions of dollars to build new resorts or take over companies. And they now can't pay the interest. James Packer was no exception. In buying into Station and Harrah's he and his shareholders were piggybacking on private equity deals which had left these companies owing US$9 billion and US$24.5 billion respectively.

The new US$2.9 billion Fontainebleau Las Vegas resort was also largely debt financed. And Mr Packer's US$5 billion Crown Las Vegas Tower (which never got started) would also have been built on borrowed money. Mr. Packer has earned a negative name in the Casino Business that all his Projects either stay on the drawing board, go insolvent or leave behind half built ghost towers that never get off ground like the Crown Las Vegas, the tallest casino in Las Vegas, was set to build by James Packer has been scrapped due to financial hardship.

Las Vegas, known as ‘Sin City’ and tolerates all forms of adult entertainment has a casino center which was bought by Mr. Packer.

However, foreign media reports that Packer is finding himself in the same financial trouble that plagues so many and is cutting back. The Sunday Telegraph has reported that Packer has put his US$50 million 165-foot luxury yacht the Z Ellerston up for sale, has pushed back the purchase of a private Boeing jet and has held up construction of the huge backyard pool complex planned for Ellerston, the family property near Scone. Packer has also put a three-level apartment in London's Mayfair area up for sale. He also recently sold his stake in Consolidated Pastoral Company for about $425 million.

Mr. Packer's tribulation seems to be getting worse with his most recent bad business decision to build a $400 million Integrated Resort and Casino Project in Sri Lanka named the Crown Colombo. Sri Lanka (known previously as Ceylon) is a debt trapped economically ailing nation that plays host to the biennial summit meeting of the heads of government from all Commonwealth nations CHOGM this November.

Sri Lanka was plagued by a 3 decade battle between its half million troop contingent and a under ten thousand cadre group of Terrorist known as the LTTE. Since 2005 the country is ruled by an autocratic familial oligarchy submerged in numerous Human Rights violations and flagrant corruption. The Indian ocean island nation Sri lanka (Ceylon) is a budget tourist, back-packer and a baggage trader's destination, it doesn't show much or any scope in graduating itself to a high roller gambling, billionaire business hub, destination to justify Crown's almost half a billion dollar bet on it. Even before breaking ground for the mega project, it has faced multiple setbacks by the majority Sinhala Buddhist clergy and left wing politicians staging violent protests forcing the Government to stall it.

Contrary to this, other sources viewed that Mr. Packer never intended to build a Resort or Casino in Sri Lanka, but was exploiting the Sri Lankan governments free for all issue of Sovereign Guarantee's on behalf of private enterprises which will allow investors to hawk for funds from off shore venture vultures at unserviceable rates of interest. This has rapidly transformed Colombo as the playing field for bankrupt billionaires and conmen to exploit on, whilst placing the Sri Lanka's zero default credit rating to take a plunge into negative credit score within the next twelve months.

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