Star’s last minute appeal for state government gaming taxes relief with jobs on the line

The chief executive of the stricken casino has pressed his case for NSW and Queensland to provide some short term tax relief to help save thousands of jobs.

Star Entertainment’s chief executive has issued a last-minute ­appeal to the NSW and Queensland governments that, without some relief on gaming taxes, its casinos in both states could be placed into administration.

Without a lifeline from banks, the stricken casino operator could run out of cash as early as next month as it burns through almost $50m a month.

To save jobs, the government needed to come to the table by putting a temporary pause on the payment of gaming taxes to help protect as many as 9000 hospitality and tourism jobs across its casinos in Sydney, Brisbane and the Gold Coast. However, Steve ­McCann does see a way forward.

“For Star to be able to complete the job, and when I say that I mean the job of the remediation and turning around the business, we need more time,” Mr McCann told The Weekend Australian on Friday. “It is achievable, but not without that time.

Star Entertainment chief executive Steve McCann.

“We have been engaging with our key stakeholders and explained to our lenders what we think we need and to governments what we think we need.”

The casino is fast running out of options and, even if it were to continue to sell assets in a fire sale situation, this still is unlikely to give it enough time to trade through the coming period.

“Our ask from government hasn’t changed,” Mr McCann said.

“We are making good progress with our remediation plans; we’re looking at all options through our business restructure to retain the vast majority of frontline jobs. We need time to reset the business.”

His comments follow Star Entertainment last week warning that the rate of cash burn in the December quarter was faster than previously thought, as the casino operator is buffeted by a sharp downturn in business from tough cashless gaming rules in NSW, where it employs 3000 people.

At the same time it has a series of cash calls on the completion of construction work on the $3.9bn Queen’s Wharf casino and hotel complex in Brisbane. At the end of December it had just $79m left in the bank. It is expected to provide an update on its cash situation early next week.

Star is also spending millions of dollars on fines, remediation and necessary upgrades of its technology, as ordered by state regulators. Its bankers have already lent it $100m, but in order to get the next $100m it needs, it first has to meet strict conditions, including raising another $160m in subordinated debt.

That’s now unlikely to be met.

Mr McCann has been holding around-the-clock talks with lenders and governments. It is understood his banks have indicated some support for the casino operator to trade through the current woes, but banking sources have told The Weekend Australian that support depends on the state governments coming to the party with a pause on tax demands.

It is understood Star has privately warned the cost of a collapse could be much higher for both governments than a tax pause, given an administrator has an obligation to lenders only.

That could mean wholesale job losses and it is likely the governments could face a greater loss of income as they only then become a creditor for outstanding gaming duties.

At the same time the efforts or remediation and gaming safety could be sharply curtailed. A possible break-up of the business, which is likely under an administration situation, would also weaken Star’s ability to invest in tourism.

Star also faces another large looming cash call from financial crimes regulator Austrac for breaching anti-money-laundering rules. In the case of an administration, any Austrac fine – which won’t be determined until later this year and is expected to exceed $100m – is unlikely to be paid at all.

The NSW government has suggested any further support is unlikely. NSW Premier Chris Minns this week said the government was “not going to step in again to help Star”.

“We’ve made the decision in relation to that. We’re hopeful their next steps don’t result in the loss of jobs,” Mr Minns said.

A NSW Treasury spokesman on Friday said this position had not changed. The Queensland government had yet to respond.

Queensland Treasurer David Janetzki also poured cold water on any assistance, saying on Friday: “As we’ve maintained, our primary focus is on those employed by The Star. We want to ensure job security regardless of company ownership.”

Mr McCann is confident Star could still emerge with a sustainable business and strong assets over time – even with tough cashless gaming rules and the introduction of spending limits. However, he said it was to be determined what the business looked like.

Mr McCann has also indicated he is working closely with regulators to reset and rebuild relations across both states.

“Suppliers, employees and a range of stakeholders are assessing the business on how the business is performing today, rather than the capability of the business in the longer term, and we’re looking to reassure all of our stakeholders that we can navigate through this with the appropriate time and support,” he said.

Star shares closed up 0.5c on Friday at 14c, but they are down 72 per cent in the past year.

Originally published as Star’s last minute appeal for state government gaming taxes relief with jobs on the line