Star faces $36.5m blow if Queen’s Wharf deal flops

Casino giant Star Entertainment’s bid to save a deal to sell its stake in Brisbane’s Queen’s Wharf precinct has come to a standstill, with the embattled publicly listed company revealing on Monday it will be forced to cough up nearly $37 million if the sale falls through.

The gaming group, which was on the brink of financial ruin for many months earlier this year, secured a deal in March to sell its stake in the glitzy riverside precinct to Hong Kong investors.

Hong Kong’s Chow Tai Fook Enterprises and Far East Consortium, which each own 25 per cent in Queen’s Wharf, last week threatened to walk away from the deal that includes them buying 50 per cent of the gaming, hotel and retail complex as well as the Treasury hotel and carpark.

The plan is for the Queen’s Wharf casino complex in Brisbane to be owned by HK investors Chow Tai Fook Enterprises and Far East Consortium, but that deal has hit a standstill.Credit: Glenn Campbell

Ahead of the looming deadline for the deal to fall over on Monday, Star released an update to the ASX revealing the parties involved had agreed to extend the negotiations to the end of the month.

The company said it would continue to discuss terms of the deal, with a sticking point understood to be Star’s bid to continue operating the casino within the precinct.

If the groups fail to reach an agreement by July 31, the deal will be terminated and Star will be forced to pay $10 million for proceeds already received from the Hong Kong investors and a further $26.5 million in equity contributions paid since details of the deal were announced in March.

Before Chow Tai Fook and Far East Consortium were unveiled as the prospective buyers of the company’s stake in Queen’s Wharf, Star had been on the brink of collapse for many months and in desperate need of a funding injection to stay afloat.

Star said on Monday the parties had agreed to a new set of principles and there would be “certain departures from the heads of agreement”.

“The Star will provide an update if there are further material developments with the respect to its negotiations with its joint venture partners, including any material changes to the (heads of agreement) which are agreed as part of the long form documents,” the company said in a statement to the sharemarket.

In April, American casino operator Bally’s agreed to become a major shareholder in Star.

This week’s update comes after hundreds of Star workers launched industrial action and walked off the job on Friday afternoon.

The strike included some workers abandoning the gaming floor, restaurants, bars and housekeeping services amid a stoush over the ongoing enterprise agreement.

Brisbane’s flagship casino has about 2000 workers. Throughout Star’s financial woes, the Queensland government has routinely said its focus is on workers at the Brisbane casino.

Star’s spiralling financial crisis began last year as gambling revenue fell and regulatory costs mounted following a run of scandals – including revelations it facilitated money laundering and allowed organised crime to operate on its premises – which led to the loss of all three casino licences.

The casino operator is due to report its full-year earnings in August. It is expected to reveal that it is continuing to burn cash due to falling revenue from its lucrative poker machines due to the restrictions on cash gambling and the dearth of high-roller gamblers.

Star shares were trading flat at 13¢ on Monday afternoon.

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