Liquidation looms as the countdown to Star’s collapse ticks down
Frustrations from state governments are growing as stricken Star Entertainment Group remains in limbo pending nailing out a rescue plan to refinance its $430m debt mountain.
Troubled Star Entertainment Group has confirmed its survival depends on it nailing out a rescue plan to refinance its $430m debt mountain.
In an statement to the ASX, the company says it is unlikely to be in a position to lodge its half yearly financial report “unless and until” it has secured a commitment to refinance all of the group’s existing corporate debt as well as an agreement to provide additional liquidity.
“The company will continue to keep the market informed of material developments ... there remains material uncertainty as to the group’s ability to continue as a going concern,” said the company. Star shares were automatically suspended from trading on the ASX Monday after the company failed to lodge its half-year financial report by the due date on Friday.
Star owes $430m to a syndicate of lenders and also is on the hook to pay back half the $1.6bn of debt on its new Queen’s Wharf hotel and casino complex development in Brisbane. It also faces a fine of as much as $300m in a action taken against it by federal money-laundering regulator, Austrac.
The stock market suspension comes amid speculation Star may have left its run too late to appoint administrators, with a fire sale of assets through a liquidation of the company looming as a worst-case scenario.
In a sign of growing frustration with Star chief executive Steve McCann and directors, Queensland Industrial Relations Minister Jarrod Bleijie said the government was committed to protecting the jobs of thousands of Star workers rather than the interests of the “boardroom suits”.
A liquidation may result in wholesale sackings and the loss of its best assets as opposed to an administration, which could give the company breathing space to restructure.
“Our interest in Star is not in the people in suits around the boardroom table – it’s in the workers,” said Mr Bleijie. “You are talking about thousands of workers and our government will be working on whatever we need to ensure those jobs are secure.”
State governments’ support?
He declined to confirm whether there was a “locked-in” plan to support workers, saying that was in the hands of the Treasurer, Finance Minister and Attorney-General.
A NSW government spokesman declined to comment on any contingency plans for workers if Star entered administration this week but said the situation was being monitored very closely. It is understood that the NSW government has been considering multiple scenarios over many months depending on Star’s next move.
Any response is likely to take into account whether administrators have been appointed or the company has fallen into liquidation. Any bailouts that might be offered by the Queensland government would also be taken into consideration.
Last-minute funding proposals
Star Entertainment’s board and advisers were locked in talks over the weekend in a desperate attempt to stitch together an eleventh-hour deal to avoid collapse.
If none of the liquidity proposals stack up, administrators could be appointed to the company as soon as Monday, potentially throwing up to 9000 people out of work.
Peter Cohen, a former chief executive of the Victorian Commission for Gambling Regulation, told the Inside Asian Gaming website that governments and regulators probably don’t care whether Star fails, as long as the business continues.
“They don’t actually care if the shareholders of these businesses make money. They care that they stay afloat, that the players get their money back, that the taxes get paid and there’s sufficient money to invest in the property to keep them going,” said Mr Cohen, who is now the director of regulatory affairs at corporate adviser The Agenda Group.
“They’re generally on government-owned land and as a landlord they want that property to be maintained in good order. But the last person that the government cares about making money is the shareholder.”
He said NSW Premier Chris Minns had quite clearly done a political calculation that saving Star was not that important. “Steve McCann and his board have to face the fact that the government and the regulator probably don’t care if they fail as long as the business continues,” he said.
Unchartered territory
Mr Cohen said Star was in uncharted territory, having three casino operations in two jurisdictions.
“We never ever thought it was ever going to be used but both NSW and Queensland have a mechanism to allow for failure,” he said.
Star’s board told the ASX on Friday that it was expecting to receive one or more liquidity proposals on Friday.
But the company warned it was in a perilous position.
“As noted in the company’s recent ASX announcements, there remains material uncertainty as to the group’s ability to continue as a going concern,” Star chair Anne Ward said.
Pub billionaire Bruce Mathieson Sr, the largest single shareholder in Star with a 9.8 per cent stake, said he was not involved in any deal to buy the Gold Coast properties.
“It’s a mess. Even they (Star) don’t know what is going on,” Mr Mathieson said.
More Coverage
Sanjeev Gupta’s deal-making days are over
The sorry state of the Whyalla steelworks is the beginning of the end for the British magnate, and the bigger InfraBuild is the next domino in line to fall.
Coles laments $500m in sales lost to supermarket rivals
Internal Coles analysis reveals the supermarket sector has lost as much as $500m in sales in the health and home categories to non-grocery retailers such as Amazon, Chemist Warehouse and Temu.