By Colin Kruger
More than 8000 jobs hang in the balance as teetering casino operator Star Entertainment is on the brink of financial collapse, with its board in last-ditch talks late on Friday to find the cash needed to keep the company afloat.
Star, which plays a crucial role in the tourism and hospitality industry of NSW and Queensland – with more than 2700 hotel rooms and more than 100 bars, cafés and restaurants operating at its resorts – failed to release its financial results on Friday.
Despite receiving several loans, Star is in a race against time as it burns through cash.Credit: Louie Douvis
With the company’s future under a cloud, its board is holding out hope of a last-minute rescue, saying on Friday that it expected to receive “possible liquidity solutions” during the day, which would be carefully assessed.
But in a sign of its deepening financial woes, Star has reiterated there is material uncertainty about its ability to continue operating.
“It is likely that the [December half-year financial] report will only be able to be finalised if the company has received liquidity proposals which, after appropriate consideration by the directors, are sufficiently capable of being progressed to finalisation in the context of determining whether the company can continue as a going concern,” Star said on Friday morning.
Star, which runs three casinos across the two states, has been embroiled in a worsening financial crisis for months, amid poor gaming turnover at its casinos, higher regulatory costs following a run of scandals, and the move to cashless gaming in NSW, with Queensland to follow.
The majority of Star’s employees are based in Sydney, and despite recent troubles, its Pyrmont site remains a major tourism destination, with 650 hotel rooms and 36 food and beverage venues. Any closure would also severely affect neighbouring businesses, including cafes and hairdressers that rely heavily on those drawn to, and staying at, the gaming precinct.
The NSW and Queensland governments have shown little interest in bailing out the company, and on Friday they pointed to the impact of Star’s precarious situation on jobs.
Senior NSW minister Penny Sharpe said the government was watching developments closely, including the impact on job guarantees for staff.
“Star has to maintain itself as a viable casino ... we’ve obviously been working with them over a period of time on a range of issues, including the importance of the employment that is there, and will continue to do so,” she said.
Star did not name the parties that are expected to provide an offer of financing, but it has confirmed previously that US finance giant Oaktree has tried to buy out Star’s debt from its lenders. US casino operator Bally’s has reportedly shown interest, as has billionaire Clive Palmer.
Chow Tai Fook and Far East, co-investors in Star’s Queen’s Wharf casino in Brisbane, attempted to buy Star’s share of the asset, and shareholder billionaire Bruce Mathieson has made an offer for Star’s Gold Coast casino.
After a brief trading halt on Friday morning, Star shares plunged 15.4 per cent to 11¢, valuing the company once worth $5 billion at about $315 million.
Star chief executive Steve McCann has unsuccessfully tried to coax lenders, state governments and investors into giving the embattled casino operator the time and cash needed to work through its challenges.
He has also previously warned Star’s stakeholders that in the event of a collapse, an administrator would need $350 million in funding to ensure it remained operational.
Queensland Premier David Crisafulli said Star’s workers were the key priority for his government.
“My only concern is for the working people there. My non-negotiable is that place has got to stay open,” he said.
“If whoever runs it in the future wants to talk to us about what future opportunities look like it ... it is about the workers.”
The Australian Financial Review reported that the company had failed to raise the funding required to meet near-term payments, including for payroll, which puts the company at serious risk of running out of cash.
Before signing the accounts, a board of directors must be satisfied that the company is a “going concern” – that it can pay its debts when they fall due.
Star, led by chief executive Steve McCann, is in a desperate struggle to meet the conditions of a loan agreement that will give it access to $100 million.Credit: Dominic Lorrimer
In September last year, Star’s directors started getting advice on “safe harbour” provisions provided by the Corporations Act that would protect them from being personally liable for debts in the event that it cannot stay solvent.
The provisions are used when a financially struggling company is considering a last-ditch restructuring attempt as an alternative to financial collapse and calling in administrators.
At its annual investor meeting in November, McCann and Star’s chair, Anne Ward, warned of the challenges ahead as its casinos struggled with the implementation of a ban on cash-based gambling – a measure to avert money laundering – which saw gambling on its poker machines dive.
“I would note that the regulatory environment and challenges [of] technology upgrades and other matters we’re dealing with in Australia are quite unique to the Australian market.
“We need to implement those, and we need to make sure that we understand what the revised revenue model is for our business across gaming and non-gaming over time,” McCann said at the meeting.
Ward added: “Continuing as a going concern will require us to be successful in relation to a range of matters, and they include meeting the various conditions precedent to secure the drawdown of the new debt, securing additional sources of liquidity, further progressing our plans for longer-term funding, implementing cost-reduction plans that we’ve outlined, completing non-core asset sales and continuing to progress our remediation plan in order to reach suitability [to hold a casino licence].”
With AAP
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.