Star’s survival circus moves from unusual to absurd

It’s challenging to know where to turn. Look one way to witness the Star Entertainment theatre that is playing in the Federal Court in NSW, with its former chief executive in the witness box.

Look in another direction to follow the existential drama as the company’s lenders knock heads with its board as the company’s coffers drain like (as they say in Days of Our Lives) “sands through the hour glass”.

Late on Thursday the Australian Financial Review reported that Star was in last-ditch negotiations to sell its share of the Brisbane Queens Wharf casino complex to its Asian joint venture partners for $50 million.

Whether this provides an 11th-hour reprieve from total financial collapse remains to be seen as Star is churning though cash at the rate of $35 million a month.

Star’s survival circus moves from unusual to absurd.

If there is a lesson to be learned from all of this, it would be that casinos in Australia are cursed for investors and for executives.

In the courtroom Star’s former boss, Matt Bekier sat through the second day of his testimony, which on Thursday included explaining his comfort level with increasing credit levels to certain customers back in 2017 – one who had been previously detained in China and Macau for alleged involvement in money laundering.

Former Star CEO Matt Bekier and his legal team leaving the Federal Court.Credit: Louie Douvis

The court heard that Bekier took 21 minutes to approve a more than $20 million boost in credit for junket operator Qin Sixin in 2017 without obtaining additional information from management about his probity.

The previous day counsel Ruth Higgins for the corporate regulator, which has brought the case, suggested Bekier was giving a false account of a conversation with Angus Buchanan, the author of a damning report containing allegations that another of Star’s junket operators SunCity had extensive ties to criminal gangs involved in money laundering.

Bekier and eight other former executives and directors of Star are being sued by the Australian Securities & Investments Commission for alleged breaches in relation to their failure to enforce anti-money-laundering controls at the casino operator.

It’s fair to say that today’s management and board of Star have nothing to do with the alleged sins of past Star regimes, but given the parlous state of Star’s current finances, their need to use precious financial resources to finance Star’s defence must sting.

But the genesis of Star’s financial problems can be traced back to those early days when the alleged lack of rigour around checking its junket customers and turning a blind eye to their sometimes chequered history became the focus of a media expose by Nine publications.

This in turn spurred a series of special regulatory inquiries and royal commissions into Crown and Star, then the departure of their board and management and ultimately a clamp-down on the industry.

The sector moved from Wild West-type regulation to strict re-regulation. This radically altered the economics of the sector. Crown shareholders were lucky enough to be bought out by US private equity Blackstone.

But Star’s financial position has moved from injured to bad, and from bad to diabolical.

The current Star chief executive now appears to be playing some sort of a poker game with banks, and shareholders, in order to stave off administration.

The company’s shares can no longer trade because the accounts have not been signed, yet the board teases investors with the prospect of a rescue via a liquidity proposal.

There has already been a series of these liquidity proposals put to the board, but they involve asset sales that are sufficiently ungenerous that they don’t stack up.

Banks are blaming the uncertainty surrounding Star’s future on its board, but the company is saying the banks are in control.

The banks were reportedly told six days ago that the company had enough cash to last a week.

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