Investment bankers are understood to have been working on fresh efforts in recent weeks to raise equity for Star Entertainment as its future hangs in the balance.
While UBS has been advising Star, the understanding is advisers at Barrenjoey had been assessing the merits of a raise, a tough assignment when there is uncertainty the casino operator can continue as a going concern.
Star currently has a $360m market value — less than its $430m of debt — and secured $1.5bn in 2023 in two separate equity raising efforts.
If Star’s chief executive Steve McCann can avoid a fire sale, then it may have some equity value.
Any equity raising would likely require a clear road map to producing cash flow and profit, say sources, at a time when earnings have crashed on the back of tougher checks around money laundering and new cashless gaming rules.
Equity investors would also need to see banks reach an agreement with the company consisting of something like a two- to three-year standstill.
In the meantime, private equity groups such as Bain Capital, Ares and Brookfield could buy out the debt from lenders at a discount and make a strong statement of support.
Star and its lenders have been wrestling with various scenarios to save the embattled casino operator, currently facing a class action and major Austrac penalties for breaking anti-money laundering rules, at a time directors and executives are currently in court over allegations by corporate watchdog ASIC they breached money-laundering controls and corporate fiduciary duties in the between 2016 and 2022.
The company this week said it had received several confidential, indicative and non-binding proposals from Chow Tai Fook and Far East Consortium seeking to acquire The Star’s 50 per cent interest in its share of the $3bn Queen’s Wharf hotel and casino project in Brisbane, along with other assets.
The board said after consideration and external advice, it determined none of the proposals had provided sufficient value for Star, but negotiations are continuing to establish whether a sale can be negotiated on satisfactory terms.
The group continues to explore possible liquidity solutions.
Various scenarios are being discussed surrounding Star’s future, including a brief period of voluntary administration for the headstock, rather than the subsidiaries which own Star’s casinos.
The move could avoid licence cancellations but escape class action and Austrac payment penalties, enabling Star’s super senior lenders, who are first in line to be paid, to get their money back.
But, experts believe it may not be a legally viable option to only put part of the business into voluntary administration.
There’s been talk Bruce Mathieson would be keen to buy Star’s Gold Coast casino, believed to be worth about $300m, while the company already holds more than $100m of cash from recent asset sales, and its Brisbane-based Treasury building carpark remains for sale.
Blackstone, which owns rival Crown Resorts, would likely be keen to take Star’s Sydney licence, but not the real estate where the Star casino is located at Pyrmont in an attempt to gain permission to take its gaming machines.
But, some believe the most sustainable path for Star’s future is finding a way to exit the Queen’s Wharf development, which has about $1.6bn of debt, half of which is owed by Star.
Star counts Deutsche Bank, Macquarie and Soul Patts as lenders, but they are yet to sell debt.
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