Star needs stakeholder support and enough staff to keep running, says insolvency expert

As Star Entertainment teeters, a Queensland-based insolvency specialist says keeping the casino business operating with sufficient staff is crucial for its survival.

The Star Grand Hotel at Queen’s Wharf in Brisbane.

A top insolvency specialist says keeping the faltering Star Entertainment operating with enough staff will be crucial if administrators are appointed to the casino group.

Business Reset restructuring practitioner Jarvis Archer said the worsening situation for Star, including the recent report of the board implementing safe harbour protections for directors, had exacerbated uncertainty.

Mr Archer said that if administrators were appointed to the stricken company, they would seek to ensure the continued operation of critical aspects of the business, including casinos and hotels, to preserve assets and jobs.

“They would engage with key stakeholders including secured creditors, regulators, employees and suppliers to understand their positions and maintain their support for the company while formulating the path forward,” Mr Archer said.

“There’s no doubt a business of this size will continue, but how that happens is uncertain.”

Star said on Monday that there was “material uncertainty” over whether it could continue operating after reporting a plunge in revenue in the December quarter, worsening its cashflow problems amid rising costs at its new $3.9bn Queen’s Wharf precinct in Brisbane, as well as dealing with fines from regulators and tighter gambling controls. It had $78m in available cash at the end of December and early this month revealed it had burnt through more than $100m in just three months.

Mr Archer said the difficulty was to understand whether Star’s turnaround plan, creditor negotiations and efforts to obtain new funding would be sufficient to overcome these challenges alone, or whether a voluntary administration would be required.

Business Reset restructuring practitioner Jarvis Archer.

If the company were unable to avoid administration, it may be saved through a deal with creditors called a deed of company arrangement (DOCA), Mr Archer said. Alternatively, some or all of the business may be sold.

He said employees were considered next in line after secured creditors such as banks and other lenders were paid, and they would be essential to the continued operation of the business if it entered administration.

“Administrators and local governments will be focused on preserving jobs,” Mr Archer said.

“All other creditors were considered unsecured creditors, including suppliers, fines and penalties imposed by regulators, the Australian Taxation Office and any other amounts owed by Star.”

Mr Archer said that although technically unsecured creditors, customers who have paid deposits for things like hotel rooms, conventions and functions were likely to see these honoured to preserve customer goodwill.

The co-operation of Star Entertainment’s secured creditors, including banks, would be critical to any restructuring.

“Like many businesses in the current economy, Star is navigating turbulent conditions, including declining revenue and increased costs, substantially impacted by the increased construction costs of the Queen’s Wharf development,” Mr Archer said

Despite their unsecured status, he said regulators would significantly influence the direction of the company and may require fines and penalties to be paid in order for the company to maintain its licences.

Star has already been fined $15m by the NSW Independent Casino Commission (NICC) following the findings of the Bell II inquiry and faces up to $300m in penalties from Austrac for alleged noncompliance with anti-money laundering laws.

“These specific challenges will form part of the complex role an administrator would undertake,” Mr Archer said.

“This case highlights how regulatory compliance and governance failures can cascade into financial instability.

“Star Entertainment’s challenges highlight the ripple effects potential insolvency can have — not just on creditors but also on employees, suppliers and local economies.”