New York-based private equity firm Blackstone is believed to considering acquiring Star Entertainment.
There’s talk that Blackstone is once again having some serious conversations about taking over Star Entertainment, which would provide synergies with its existing Australian casino operator, Crown Resorts, which operates in Melbourne, Sydney and Perth.
Earlier, the understanding was that the NSW government was opposed to both Sydney casinos being owned by one operator, but with the possibility of a Star collapse, it may be changing its position.
It’s likely that Blackstone would make a move on Star once it has entered voluntary administration.
Sources say the chance to gain Star’s gaming machines, should the NSW government allow Crown operate pokies, is a key attraction.
The buyout fund, with over $US1 trillion under management globally, has deep pockets and could weather any short-term storm for the next two years.
After its purchase of Crown Resorts, Blackstone is an approved casino operator in Australia.
Also, Star’s boss Steve McCann used to run Crown, so his relationship with Blackstone is strong. Star Entertainment’s future remains uncertain.
Action against former Star Entertainment directors by the corporate watchdog ASIC begins on February 10.
One possibility is that Star is placed into voluntary administration through FTI Consulting for a few weeks while the NSW government offers it the chance to pay its gaming taxes at a later stage to provide a financial reprieve. Lenders could release some funds in escrow to pay for the operating costs.
However, many consider its Star’s operating model to be broken following major ASIC fines for money-laundering breaches and new regulations that ban cash gaming. They say its only hope is a major restructure or break-up and asset fire sale to real estate buyers and wealthy private investors.
Star, which counts Deutsche Bank, Macquarie and Soul Patts as lenders, has been running out of cash and it admits there’s “material uncertainty” as to whether it can continue as a going concern.
Its revenue plunged in December to $299m for the second quarter and costs have risen over its $3.9bn Queen’s Wharf precinct development. It had $78m cash at the end of December.
Blackstone quarterly earnings released last week showed its infrastructure business was playing an increasingly important role in its expansion, the Wall Street Journal said.
The private equity firm that last year bought Australian data centre operator AirTrunk for $24bn generated $US703.m in net income, up from $US151.8m a year earlier as revenue more than doubled.
While quarterly earnings increased, driven by many key business lines, the result was dragged down by its real estate business due to higher interest rates.
But infrastructure assets were the largest single contributor to earnings.
The situation has prompted some questions in the market as to whether Blackstone would launch an Asia-Pacific infrastructure fund, but Blackstone sources say it has no current plans.
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