Fresh blow for Star Entertainment as refinancing talks collapse

Star Entertainment’s much hoped for $940m refinancing lifeline has stalled, throwing fresh doubt on its future as it looks to US suitor Bally’s Corp for a potential loan.

Star Entertainment’s$940m refinancing lifeline has failed after the NSW government refused to back a key lender condition of the deal, leaving the troubled casino operator fast running out of options to avoid insolvency.

Star had been in talks with Melbourne-based Salter Brothers Capital for several weeks about a rescue package that could have provided enough cash to avert a financial collapse of the casino company and employer of more than 8000 people.

The deal foundered when financiers demanded “priority” security over non-gaming assets located on government-owned land.

It is understood the NSW government was not prepared in any refinancing scenario to relinquish first-ranking security over the public leasehold harbourside land on which Star Sydney is located.

Hopes for the survival of the company, headed by former Crown boss Steve McCann, now rest on an unsolicited offer from US-based Bally’s Corp.

Without that, Star is likely to appoint administrators within a week as its cash reserves are depleted.

Star is selling its half-share in the Queen’s Wharf precinct in Brisbane to its Hong Kong partners Chow Tai Fook Enterprises and Far East Consortium to reduce crippling debt levels.

Star said it had worked “diligently” with Salter Brothers and third parties, including state governments and regulators, but the proposal had been withdrawn.

“It became apparent that it was unlikely that a number of the conditions precedent to the refinancing proposal would be able to be satisfied, either at all or in sufficient time to address the current liquidity needs of the company,” Star said.

Pubs billionaire Bruce Mathieson, who is Star’s biggest single shareholder with just under 10 per cent of the company, said the refinancing had been a “very hard deal” to put together given the changing regulatory environment and restrictions in the casino sector.

“That has been the problem from the start,” said Mr Mathieson. “It has been very complex and it’s been very difficult. You never know what restrictions are coming in and whether it will make the whole thing unviable.”

Star has not been able to lodge its half-year report for the six months to December 31 and trading in its shares remains suspended. They last traded at 11c.

Salter Brothers said that after many months it became apparent it would not be able to achieve the “necessary security arrangements that we had sought”.

“We take this opportunity to express our appreciation for all the work and effort of Steve McCann and his team, along with their advisors at UBS, in working with us to try and achieve an outcome,” it said.

The Star in Sydney. Picture: NewsWire/ Gaye Gerard

Star is continuing to explore solutionsincluding engaging with Bally’s Corpin relation to a funding proposal received on March 10.

“However, there remains material uncertainty as to the group’s ability to continue as a going concern,” Star said.

The unsolicited offer from Rhode Island-based gaming and entertainment company Bally’s includes a capital raising of at least $250m, under which Star would issue convertible notes.

Star had earlier been lukewarm on the Bally’s deal, which would see the US firm take control of the entire company, including Queen’s Wharf.

It is understood Star would be reluctant to jettison the deal to offload Queen’s Wharf to its Hong Kong partners, but it is expected Bally’s is now in the box seat to dictate terms.

Star plans to sell its 50 per cent stake in Queen’s Wharf and other assets to the partners for $53m plus the acquisition of two luxury hotel towers at The Star Gold Coast.

The Hong Kong partners hold a combined 50 per cent in the hotel, retail and casino development on the Brisbane River that opened last year.

The Bally’s offer would see it take a minimum of 50.1 per cent of Star, with the suitor saying last month it was “very open to discussing a larger transaction”.

It said its proposal was fully funded and not subject to any financing contingencies.

Bally’s owns 19 casinos in the US as well as operations in the UK with about 17,700 poker machines, 630 table games and 3950 hotel rooms.

Bally’s chairman Soo Kim describes himself as a “corporate fireman” whom companies call when they get into trouble.

Mr Kim’s hedge fund, Standard General, took control of Bally’s in a $US4.6bn ($7.2bn) deal this year. Founded by Mr Kim in 2007, the fund takes “a private equity-like approach to investing in public companies while shorting equities and credit to generate alpha and manage risk during periods of market volatility”.

Originally published as Fresh blow for Star Entertainment as refinancing talks collapse