Star Entertainment begins 500 job cuts as it considers Sydney casino sale
Star Entertainment chief executive Robbie Cooke is considering a sale and leaseback of the company’s flagship Sydney casino, as the first wave of retrenched workers leave the gambling group.
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Star Entertainment chief executive Robbie Cooke is considering a sale and leaseback of the company’s flagship Sydney casino as it battles to plug an earnings blackhole, as regulatory screws tighten and it faces mammoth potential tax increases.
Mr Cooke confirmed the first of about 500 retrenched workers would leave the gambling group on Thursday as part of a plan to slash $100m in costs.
“The first jobs are leaving today, and the rest of the 500 will be in the next three weeks,” Mr Cooke told the Macquarie Australia Conference.
Star announced the job cuts last month, along with a salary freeze, to combat a “rapid deterioration” in its earnings, citing tightening regulation and fines for flouting money laundering laws.
Mr Cooke also said it was in the process of receiving final bids for the Sheraton Grand Mirage Resort on the Gold Coast, which he said had a purchase price of $140m.
“We’re definitely looking to get more than what we paid for it,” he said.
The Australian has previously reported the building, which Star owns in conjunction with Hong Kong developer Far East Consortium and retailer Chow Tai Fook, could be sold for as much as $200m.
The hotel is one of a number of properties the loss-making casino group has on sale, as it plans to refinance debt and improve its liquidity position to increase its covenant headroom.
Star has engaged investment bank Barrenjoey to complete a strategic review of the group. Mr Cooke said the review was looking at all options, which could potentially include a sell-and-leaseback of its Sydney casino.
“Everything is on the table,” he said. “We are actually focused on trying to solve for the tax base. But if we can’t get that sorted, then we will have to look at alternatives.”
With continuing uncertainty stemming from potential further fines from financial crime regulator Austrac and the proposed hikes to the NSW casino tax rate, doing a sale and lease back would be difficult because it would require having “a clear line of sight” on earnings, Mr Cooke said.
Under a proposal from the former Perrottet government, Star and its new Sydney rival Crown Resorts will pay an extra $120m a year in casino taxes from July 1. The current Minns Labor government is yet to confirm if it will adopt the proposal but has been working closely with Star to understand the implications such a hike will have on its operations.
Gambling reform has been a fraught issue in NSW, which is one of the world’s biggest pokies markets with more than 100,000 gaming machines – almost the combined tally in Australia’s other states and territories.
In February, Star announced a writedown of $988m on its Sydney gaming complex as a result of the NSW’s proposed casino tax hike.
It has since raised $800m from investors, including from poker machine industry veteran Bruce Mathieson, who has amassed a near 10 per cent stake after tipping in about $80m into the company.
Mr Mathieson said last month that NSW’s proposed casino tax hike would “nearly ruin” Star. “Really, to be honest, it stops capex, it stops employment – all the things that you need to do. I mean, you can’t have a company just run stagnant and virtually going backwards because of tax. It’s just impossible,” Mr Mathieson said.
Already, NSW and Queensland casino regulators have each fined Star $100m over the money laundering breaches and other wrongdoing. Meanwhile, about 20 senior executives, including most of former chief executive Matt Bekier’s leadership team, have left the company.
“I don’t know why they (the NSW government) would want to belt the shareholders any more. I think everybody is awake to what’s got to be done and what’s got to be done and will be done – the company is not that silly,” Mr Mathieson said.
Star has been at pains to highlight to the NSW government that it is struggling to keep the lights on across its three city casino empire.
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Originally published as Star Entertainment begins 500 job cuts as it considers Sydney casino sale
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