Packer’s Barangaroo dream becomes a nightmare
James Packer and his Crown casino group have spent $2bn building a lavish casino at Barangaroo - with Reserve Bank-equalling fabulous views across the Harbour - which they now almost certainly will be prohibited from keeping control of.
After "counsel assisting" the NSW casino inquiry "submitted" to the inquiry that Crown was "not a suitable (corporate) person" to hold the licence, it is all-but impossible to see the inquiry - when it actually reports in February - coming formally to a different conclusion.
The reason why Crown was ruled unsuitable is, according to that counsel assisting, Packer and the influence he has wielded as controlling shareholder - which was, again according to the counsel, "harmful to the public interest".
Now, on one level, this might prove to be entirely academic.
As I've been explaining, Packer has been on a - true, very erratic - course to quit his stake in Crown for close to five years after abandoning his vision of building a global gaming empire when he quit Macau, the centre of 'everything', and his partnership with Hong Kong's Richard Li.
That would be one way of resolving the Sydney issue - Packer selling out of Crown.
If he did it would be extremely costly.
In the wake of all this, the huge uncertainties over both our broad relationship with China and whether more specifically the Chinese high rollers - the 'super-whales' - will come back to Australia anytime soon, will be able to come back in a time of plague and Beijing displeasure, has combined to halve the Crown share price.
The biggest threat from the inquiry to Packer is a forced sale.
The other route would be for a still-Packer controlled Crown to sell or partner Barangaroo. But again, it would not want to have the timing taken out of its hands.
Any buyer would also have to go through probably lengthy probity approvals - made more rigorously lengthy by what's been happening.
Then there're the not exactly small matters of Crown's Melbourne and Perth casinos. How could the regulatory authorities in those two states not follow any NSW ruling on fitness?
In the world before it blew up Packer had built up a very attractive casino portfolio. Both Melbourne and Perth had - in a time of plague, have? - uniquely attractive local monopoly franchises. That's literally true in Perth, structurally in Melbourne.
Thanks to Lloyd Williams - who of course won his 7th Cup on Tuesday - Packer's Crown had arguably the best high-roller casino in the world in Melbourne, on top of that highly profitable local 'grunt' franchise.
Although 'had' had become the operative world, as management through the 2010s had seriously devalued the brand - reflected in the disastrous developments unveiled in the China relationships both before and through the inquiry.
Now in previous years, Crown would have been able to make commitments - around say Packer's voting rights and board representation - to continue to be able to run Barangaroo.
In the present climate I suggest that is no longer possible. If the final report concludes that Crown is not a suitable holder of the Barangaroo licence, either the licence or it will have to go.
Unless that is, Packer has already 'gone' or is in the process of 'going' himself.
It makes far more sense for Packer to act proactively - while he still has the three premium licences to 'sell' as a package.
Against that, is the mess created by the virus, the bans on foreign tourists and the whole 'China thing'.
In short, it's complicated and ugly.
RBA DELIVERS 2 PER CENT HOME
The biggest immediate impact of Tuesday's Reserve Bank package has played out in those rate-busting sub-2 per cent four-year fixed loan rates.
We've never seen home loan rates starting with a '1' before.
Now, three of the big four banks have owner-occupier loan rates (true, just) below 2 per cent.
The fourth bank, the ANZ, took a different course. It cut rates more than the others across all fixed terms; its four-year rate only dropped to 2.29 per cent (the five-year rate as well).
This flows directly from the RBA's move to buy bonds with 5-10 year terms, making it easier and cheaper for banks to raise longer-term funding (necessary to fund low-rate four-year loans).
The rest of the RBA's package - its official rate cut to 0.1 per cent; buying bonds out to three years at that lower yield; plus the lending to the banks now at 0.1 per cent - also contributes.
Yes, none of the banks has 'passed on' the 0.15 per cent cut to floating rate borrowers. But they were never going to get all of that anyway, as the banks find it all-but impossible to cut the rates they pay on deposits. They were mostly already at or near zero.
It is much better for borrowers to get the cuts in fixed rate loans.
It gives them much more choice. It gives them opportunities to refinance and to lock in these loans rates, now out to four and five years.
Shadow treasurer Jim Chalmers gets to wear the dunce's cap for his embarrassingly silly claim that the RBA been forced to act because the Government wasn't doing enough.
This exactly complements when the government is doing.
He should read what I've just written and try to understand it.
That's what the RBA set out to do, along with taking pressure off the Aussie.
Originally published as Packer's Barangaroo dream becomes a nightmare