Star Entertainment Group running out of time and survival options
Troubled casino operator Star Entertainment Group is facing collapse within days as it runs out of suitors prepared to prop up a company now considered beyond repair.
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Troubled casino operator Star Entertainment Group is facing collapse within days as it runs out of suitors prepared to prop up a company now considered beyond repair.
Star announced this week that a $940m refinancing package from Melbourne-based Salter Brothers had foundered after the NSW government declined to give up its priority security over crown land on which the company’s Sydney casino is located.
Star said it was continuing to mull an offer from US-based Bally’s Corp under which it would take a majority stake in the company for $250m – or potentially more, according to market speculation.
Shaw and Partners senior investment adviser Adam Dawes said Star was running out of suitors, with the Bally’s offer being a severe discount to the value of the company’s assets.
“There are a lot of things against the casino sector at the moment, and that’s why we are seeing the guys from the US coming in,” he said.
“They have cash and know the company is on its knees.
“If you were Star, you would probably not take the Bally’s deal but they are running out of choices. The company employs a lot of people and the NSW government should probably step in with a lifeline but they won’t.”
The NSW and Queensland governments as well as Star’s existing syndicate of financiers will need to sign off on any takeover or future refinancing deal. Those financiers have so far been reluctant to risk their security over the company’s hotel and casino assets, while both governments have signalled they will not provide any further assistance to Star.
The company has been damaged by a series of inquiries that revealed a lack of money laundering and other controls, which has resulted in its casinos being under the control of a special manager for three years.
The influential Inside Asian Gaming industry website this week took aim at Star’s directors, saying US President Donald Trump “may have created the Space Force in the US, but in Australia we have the ‘Star Farce’, which continues to roll out month after month after month under this board.”
Queensland Attorney-General Deb Frecklington said this week the government was having “productive conversations with The Star and would continue to engage with their management team as they navigate their financial difficulties”.
It is understood the Star board could appoint administrators to the company as soon as next Tuesday as it runs out of cash and risks trading insolvent. An administration would put at risk more than 8000 jobs across Brisbane, the Gold Coast and Sydney as administrators seek to cut costs and line up a fire sale of assets.
It is likely the previously announced sale of the Queen’s Wharf precinct in Brisbane to Star’s Hong Kong joint venture partners Chow Tai Fook Enterprises and Far East Consortium would proceed as it would allow administrators to get up to $1bn of debt off Star’s bottom line and raise much needed cash to keep some operations going.
Other scenarios include rival casino operator Crown Resorts taking over Star Sydney for its lucrative pokie machine licences. Crown could possibly close Star’s casino and shift operations to its Barangaroo site. Crown has declined to comment.
Pubs billionaire Bruce Mathieson, Star’s biggest single shareholder, meanwhile would acquire the company’s lucrative Gold Coast properties.
Bally’s Corporation is looking to secure all of the casino group’s assets in the possible takeover.
Bally’s chief executive Robeson Reeves told Sky News this week that while it was not “troubled” by the deals Star was making to sell its assets “we want to keep everything together, rather than strip it apart”.
“We think that things tend to operate better if they’re one larger organisation where you can actually generate benefits for each of the properties one by one by making one tweak in one place.”
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.
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Originally published as Star Entertainment Group running out of time and survival options
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