Why Salter’s Star offer was always questionable

Star’s Brisbane facility doesn’t have as much cachet as its Gold Coast casino. Picture: Glenn Campbell

Star Entertainment’s $750m recapitalisation deal with Salter Brothers has fallen apart but there were doubts emerging beforehand that the deal would happen.

Salter Brothers describes itself as one of Australia’s leading alternative investment managers with a focus on specialist property equities and credit, and is controlled by Australia’s wealthy Salter family.

But the business is typically a manager for third-party funds and relies on mandates from predominantly large Asian groups for its investments of major scale, such as the Singapore sovereign wealth fund GIC.

GIC was not behind the Star Entertainment $750m loan and offer of up to $940m “in kind” payment, but Salter would have likely needed the money of others to follow through.

It was considered curious by some that the backers of the Salter proposal were not identified by Star along with Salter.

Many are also anticipating that a buyout proposal of Star by Bally’s Corp doesn’t eventuate, because Bally’s will be financially stretched.

One prediction is that ultimately Star just becomes the Gold Coast casino asset and it gets owned by one of Australia’s billionaires like Bruce Mathieson, Clive Palmer or Gina Rinehart.

This implies that Blackstone would take over the licence of Star Entertainment in Sydney to gain permission to use its slot machines, and shuts Star Sydney down.

Star’s Gold Coast casino is considered the best it has, because consumers go to the destination to have a good time and may gamble while there.

Star’s Queens Wharf project in Brisbane may have been considered a spectacular asset, but a view is that Star has overcapitalised for the city where few would come to gamble except, perhaps, the high-roller market that no longer exists.

There was $35m released a few weeks ago to Star from a sale of its share of the Queen’s Wharf project to Asian joint venture partners Far East Consortium and Chow Tai Fook, but observers say that would only last Star a couple of months.

While a $250m bridging loan was floated, it will almost certainly be blocked by senior lenders not wanting to share the security over Star’s assets.

Chief executive Steve McCann may now run into debt covenant breaches after already paying waiver fees for covenant breaches in the second half of last year.

Star told the market on Thursday that Salter had not offered a binding debt commitment letter and the refinancing proposal had now been withdrawn.

It was unlikely that a number of the conditions would be able to be satisfied to address the company’s liquidity needs, Star said, as it also reiterated uncertainty as to its ability to continue as a going concern.