Star Entertainment’s deal to sell Queen’s Wharf still alive as talks continue

Cash-strapped casino group Star Entertainment has bought itself more time to avert the collapse of a deal to offload its stake in the $4bn Queen’s Wharf precinct in Brisbane.

Star Casino in Sydney is losing money.

Cash-strapped casino group Star Entertainment has bought itself more time to avert the collapse of a deal to offload its stake in the $4bn Queen’s Wharf precinct in Brisbane.

Star said talks to nail down the deal to sell its 50 per cent stake in Queen’s Wharf to its Hong Kong venture partners Chow Tai Fook Enterprises and Far East Consortium would now continue until the end of the month with some changes expected to the original agreement.

The Hong Kong venture partners last week threatened to terminate the March heads of agreement (HoA) on the deal after a falling out on the commercial terms.

As reported in The Australian, K Capital Group’s David Kingston, whose firm holds senior debt in Star Entertainment, said the latest hurdle means the group is “not out of the woods” but neither was it all doom and gloom.

In its update, Star said the parties had “agreed a set of principles under which there will be certain departures from the HoA”. They will progress negotiations with a view to finalising long form documents.

Star also has agreed to repay the $10m of proceeds it has already received from the joint venture within 30 days from July 7, if the negotiations fail. It has also agreed to reimburse the JV partners for its share of equity contributions to the venture since March 31, which currently stands at $26.5m and is payable within 60 days from July 7, again if talks fail.

Mr Kingston said that the Queen’s Wharf sale would likely go ahead given the Hong Kong partners already had a big stake, not only in the precinct but also as substantial shareholders in Star Entertainment itself. “There may be a bit of posturing going on,” he told The Australian. Far East Consortium joint managing director Wendy Chiu recently told her shareholders that the company was prepared to walk away from the deal if the numbers did not add up.

Star workers in Brisbane protest against wages. Picture: Lyndon Mechielsen

“There are some different interpretations between Star and Chow Tai Fook and FEC,” Ms Chiu told an investor briefing in Hong Kong. “Honestly, the commercial terms have to add up, especially given this environment.”

Chow Tai Fook and Far East Consortium, which currently each hold 25 per cent of Queen’s Wharf, would have emerged from the deal with 100 per cent ownership of the integrated casino project in Brisbane.

Under the terms of the original agreement, the Hong Kong partners would also acquire the company’s Treasury Hotel and two car parks in Brisbane.

In return, Star would receive $53m and acquire the partners’ interest in two hotel towers at its Gold Coast property. The company’s move to sell Queen’s Wharf for a fraction of what it cost to build underscores its desperation to raise cash and also jettison a project blighted by delays and cost overruns.

Continuing uncertainty over the Queen’s Wharf deal comes after Star shareholders last month approved a $300m buyout deal from US casino operator Bally’s Corp and pubs billionaire Bruce Mathieson, a last-minute package that saved the group from almost certain collapse.

The deal to sell Queen’s Wharf will allow Star to get up to $1bn of debt off its bottom line and raise much-needed cash to keep some operations going.

Star has faced a series of regulatory and court actions related to its lax anti-money laundering controls and poor corporate governance that has meant its casino licences in both Queensland and NSW are under the control of a government-appointed manager.

The Queen’s Wharf precinct, which includes a casino, hotel and mixed retail area, continues to bleed red ink after massive cost overruns and delays in its opening last year.

Staff at Queen’s Wharf walked off the job for several hours on Friday, claiming Star was attempting to slash weekend penalty rates and offering a wage deal that failed to address the cost-of-living crisis.

Mr Kingston noted the current board under Steve McCann had done an admirable job pulling off the Bally’s Corp rescue deal and keeping the doors open but had to contend with poor management decisions from the past.

That included excessive capital expenditure on Star Sydney and cost overruns at Queen’s Wharf. He said the company was also facing regulatory burdens, such as carded play, that meant it was not on a level playing field with its competitors, including pubs and clubs.

“Heavy regulation means the Sydney casino has moved from large profits to significant losses,” Mr Kingston said. “There also has been overcapitalisation.”

Originally published as Star Entertainment’s deal to sell Queen’s Wharf still alive as talks continue