By Colin Kruger
Star Entertainment avoided collapse on Friday after signing a deal to exit its Brisbane resort, but the casino operator’s shares will remain suspended from trading this week as the board remains unable to assure themselves that the company is a going concern.
“This transaction is an important milestone for the company and contributes to providing a potential pathway towards financial viability,” chief executive Steve McCann said.
Star received a $35 million cash payment on Friday after agreeing to sell its 50 per cent stake in Brisbane’s Queen’s Wharf casino to its partners, Hong Kong-based Far East Consortium and Chow Tai Fook Enterprises, which will now take full ownership of the venue and business.
The sale of Star’s Brisbane casino will ensure it has enough cash to survive for a few more weeks.Credit: Glenn Campbell
The deal will end its exposure to further financial demands at Queens Wharf and raise its exposure to the properties surrounding its Gold Coast resort.
But Star only has a few weeks to secure the longer-term funding plans – which it also unveiled late on Friday – needed to keep itself afloat.
This includes a $250 million bridging finance facility which will underpin its finances until the end of April while a proposed financing proposal is explored that could provide up to $940 million in debt capacity.
Star confirmed that the latter is needed to ensure its long-term survival and hence allow Star’s board to sign off on its financial accounts and allow its shares to trade again.
“The Refinancing Proposal, if finalised, would provide The Star with sufficient liquidity to refinance all of the Group’s existing corporate debt and is not conditional on either the purchase of the existing senior debt at a discount to par or any government tax deferrals or waivers,” Star said.
Star flagged on Friday that there was no certainty that the $940 million refinancing proposal would succeed, and the bridging facility from King Street Capital Management – which charges 15 per cent interest rate – was subject to numerous conditions.
“The conditions precedent to the Bridge Facility include, among others, entering into an intercreditor agreement with The Star’s existing lenders, obtaining relevant probity approvals and regulatory consents for The Star to provide first ranking security over The Star Gold Coast (and associated assets),” Star said on Friday.
Star said on Friday that the unnamed financier of its long-term financing proposal is expected to complete due diligence as early as March 18 while the two parties work towards a concrete offer.
The deal to sell its new Brisbane casino will mean its two partners pay a total of $53 million for Star’s share of the venue and it will also receive $5 million a month to run the casino, rising to $6 million a month as of next year.
The casino is under license to Star, who will continue to operate it.
“The QWB Project is a world-class entertainment and leisure precinct in the heart of Brisbane’s central business district, one of Australia’s fastest growing cities and the host of the 2032 Olympic and Paralympic Games,” Far East said on Friday.
The Brisbane deal with its joint-venture partners also gives Star more real estate exposure to its Gold Coast casino which McCann – the former CEO of property giant Lend Lease – is planning to exploit and help offset the risks in its gambling business.
“We are excited about our future in the Gold Coast. We will have almost 1200 hotel rooms at the Gold Coast following the opening of the five-star Andaz Hotel in late 2025 and believe that once we optimise these operations and our strategy, our full ownership of these hotels will enhance our integrated offering and provide an opportunity to improve the performance of the business,” he said.
Star faces years of financial losses and negative cash flow. Revenues are forecast to decline again this year and rise modestly the following year. The company faces further penalties, including fines from the money laundering regulator AUSTRAC which is expected to exceed $300 million.
This is not lost on McCann.
“The company still faces various risks, including availability of funding, the ability to restore our licences (including implementing our remediation plan and various regulatory reforms relating to carded play and cash and time limits), maintaining support from stakeholders, resolving the various litigation and claims from historical issues and managing the business in a period of continuing lower revenue and negative cashflow,” he said on Friday.
Star shares last traded at 11¢.
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