Star Entertainment Group has entered a trading halt ahead of its half-year results on Thursday as the casino giant mulls options to manage its debt.
Sources close to the distressed debt negotiations confirmed Oaktree Capital Management was no longer active in discussions with The Star to pay down the casino operator’s debt via a convertible note deal, despite The Star entertaining talks with the US investment giant earlier this week.
Local financial services firm Barrenjoey and Macquarie Capital are reportedly working on an equity raise. The Australian first reported Barrenjoey’s involvement on the deal. Star Entertainment Group declined to comment
Star Entertainment Group chief executive Robbie Cooke. Credit: Louie Douvis
Last week, The Star issued a dire market outlook ahead of its results, which sent the company’s share price sliding more than 30 per cent to $1.28. In it, the group flagged it faces a write-down of between $400 million to $1.6 billion, plus millions of dollars in remediation and transformation costs, and is considering an “urgent review” of its Sydney operations as a result.
The final figure is only expected to come in at $1.6 billion if the NSW government proceeds with its proposed tax hike on casino table games and poker machine earnings. Under the proposed increase, poker machines in casinos would attract a top tax rate of 60.67 per cent. It is expected to take effect from July.
In the past six months, The Star’s share price has slumped more than 65 per cent to $1.47 and its market capitalisation has plummeted from $4 billion in 2021 to $1.4 billion. The Star’s shares were trading at $1.52 before the trading halt.
Cooper Investors – which previously held an 8 per cent holding in the company – sold close to 20 million shares following the announcement and is no longer a substantial shareholder in Star Entertainment.
A spokesperson for NSW state treasurer Matt Kean told this masthead on Friday, the extent of The Star’s financial stress was not clear when the proposal was raised in December and his department has been engaging in discussions with the group.
It’s not yet clear whether this means the government will revise the proposed tax.
“The Star faces financial difficulties due to the fines and loss of revenue caused by their historic, systemic, severe regulatory failings and illegal activities that were not visible to the market,” the spokesperson said.
“These severe regulatory failings and illegal activities have put the livelihoods of The Star’s employees at risk, so the NSW government will continue working with The Star to ensure past failings do not place further pressure on The Star’s workers.”
Brokers at global investment bank Credit Suisse warned earlier this week that if The Star’s cash levels continued to drop further in the next financial year, it would put pressure on the company’s debt responsibilities, and added the business could raise $200 million to lower the risk.
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