Star Entertainment is believed to be positioned for an $800m equity raising by Friday to pay down debt as the company remained in a trading halt on Wednesday night.
DataRoom understands that Barrenjoey is working on the raise, and it was said that shares were being sold at $1.10 each, with chatter in the market that the offer was in the “low ones”.
Star’s shares last traded at $1.52.
Should shares be sold at $1.10, as suggested, it puts the offer at a 27.6 per cent discount to the closing price.
Before this week there has been plenty of conjecture about how much Star Entertainment would raise, with analysts estimating that the amount could be around $500m.
But sources say that by raising $800m, Star would have plenty of funds available to address its woes, which include four class actions and Austrac litigation.
It’s a large amount of funds that Star Entertainment is searching for and the question is whether the price is low enough to gain investor support to inject so much new capital.
Among the backers for the raise is pub baron Bruce Mathieson.
Credit Suisse has previously worked for Star Entertainment, while Flagstaff is close to the business, as is Macquarie Capital.
It is believed that a major global investment bank may be missing from the billing on the equity raising because the risk committees of global investment banks are averse to assisting casino operators that have breached money laundering laws from a reputational perspective.
Star entered a trading halt on Wednesday, with the company informing the market that it expected to make an announcement to the Australian Securities Exchange regarding capital structure initiatives, with trading to resume on Friday.
The company declined to comment on whether a raise was afoot.
The talk in the market about a raise by Star Entertainment comes after the company held talks at the weekend about a convertible note deal with private equity firm Oaktree Global Management involved, say sources.
However, it is understood that the company opted against the convertible note structure.
Star Entertainment’s net debt was $1.15bn at June 30 and its market value is now $1.78bn.
The company has been expected to raise capital after it recently downgraded earnings and as it faces regulatory changes to its casino in Sydney from the NSW state government.
This is along with fines and class actions relating to a breach of anti-money laundering and counter-terrorism financing laws and it has also been making operational changes so that it will comply with regulation.
DataRoom reported on Tuesday evening that the company had recently been in talks to amend its debt covenants with its lenders.
Among Star’s lenders are understood to be the big four Australian banks.
Overall, Star’s debt covenant is 3.75 times its earnings before interest, tax, depreciation and amortisation.
With the latest earnings predictions, Star’s debt is now between 3.5 times and 4 times, say sources.
Its off balance sheet Brisbane casino development joint venture, of which it is a part owner, is understood to have between $2.4bn and $2.6bn of debt.
Star reports its results on Thursday.
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