Casino group Star Entertainment in emergency rescue talks with financiers over the weekend

Star Entertainment has offloaded its Treasury casino building in Brisbane for $67.5m but faces a weekend of negotiations with financiers as it attempts to stave off a disastrous collapse.

Star’s Queen's Wharf in Brisbane has been opened. Picture: John Gass

Star Entertainment has announced the sale of its former Treasury casino building in Brisbane

as it heads into a weekend of crisis talks with financiers amid a deepening cash crunch.

Star said it had reached agreement to sell the leasehold interest in the Treasury Brisbane to Griffith University for $67.5 million. Net proceeds are expected to be $60.7 million after settlement adjustments. The sale is rare good news for the troubled casino group as it grapples with opening delays at Queen’s Wharf that includes a falling out with retailer DFS Group.

The troubled group remains in a trading halt amid a $300m cash crunch brought on by a loss of investor confidence following its failure to lodge its annual financial report on time last Friday. That came the same day the Bell II report was released into Star’s continuing regulatory failures.

The company, which operates casinos in Sydney, Brisbane and the Gold Coast, has faced a perfect storm over the past week after barrister Adam Bell SC found that Star was continuing to fail the standards required of a casino ­operator.

It now emerges that the opening of a promised luxury brand precinct at Queen’s Wharf will be delayed after negotiations collapsed earlier this year with DFS, part of the Moet Hennessy Louis Vuitton (LVMH) Group.

The luxury retail giant, which has a portfolio of 750 sought-after brands, was expected to take up a shopping area spanning more than 6000sq m at Queen’s Wharf, but that space remains empty on level four of the recently opened complex.

DFS Australia has now lodged a claim against Queen’s Wharf ­developer Destination Brisbane Consortium, of which Star is the major partner, in the Brisbane ­Supreme Court for misleading and deceptive conduct.

Shop space at the Queen’s Wharf development is empty due to a legal dispute with luxury brand retailers. Picture: Glen Norris

In 2021, the Queensland government trumpeted the signing of a deal between Queen’s Wharf and DFS, with the shopping precinct originally due to open in late 2022. “Queen’s Wharf’s luxury shopping to be the envy of the ­nation,” the government’s press release said.

Star has been feeling the impact of costly delays in building the $3.6bn Queen’s Wharf project, which opened last week to much fanfare. According to filings to the Australian Securities & Investments Commission by the group’s Queensland subsidiary last year, cost overruns at the project are expected to be up to $260m.

Star late on Wednesday issued a statement saying it was reviewing its financial and liquidity position with various advisers as it tried to finalise its preliminary ­financial accounts for the 2024 ­financial year. Star’s board also has revealed it had discussed safe harbour provisions, underscoring the dire financial straits the company has found itself.

Outdoor public space at the Queen’s Wharf development. Picture: Glen Norris

Safe harbour legislation introduced in 2017 allows directors relief from personal liability and the opportunity to continue to trade in an insolvent company provided they are taking a course of action reasonably likely to lead to a better outcome for creditors.

Morningstar gaming analyst Angus Hewitt said the liquidity discussion being held by Star with its advisers was concerning, especially given the company raised $800m in equity in 2023 and a further $750m this year, wiping its old debt book in the process.

“We thought this was comfortable enough to weather the near-term headwinds of a weaker discretionary spending environment and sharply higher labour costs,” Mr Hewitt said in a note to investors. “But it seems it may not be sufficient, potentially because capital costs at Queen’s Wharf have spiked more than expected or earnings are weaker than expected.”

Queensland Premier Steven Miles has signalled that his government may offer a deferral of tax payments to protect almost 3000 jobs at Queen’s Wharf.

Star paid the Queensland government more than $180m in taxes and levies last year. Any lifeline granted in Queensland would make it harder for NSW to reject similar help, given Star employs close to 4000 people in Sydney.

The Star has sold the Treasury casino building in Brisbane.

Veteran Brisbane stockbroker Charlie Green, director of Hunter Green IB, said it was time for the Queensland government to step in to support Star, at least for the short term. “They need to fix it, finish it and flog it,” Mr Green said. “The moment they do, everyone can relax about getting paid, especially the staff.

“I am reminded of the US and UK government bailouts of banks during the Global Financial Crisis – in many cases the government made money on the exercise.”

A tax holiday would free up much-needed cash for Star and give more confidence to banks and other investors to back the company with more money.

It also would allow Star to proceed with asset sales worth up to $220m, including offloading the Heritage buildings in Brisbane.

Star’s regulatory issues came to a head last Friday when the NSW Independent Casino Commission publicly released Mr Bell’s second report that flagged continued concerns about the company’s suitability to retain its Sydney casino licence. On the same day, the release of the group’s annual financial results was delayed, leading to the suspension of its shares on the ASX and a loss of confidence by investors and banks in the future of the company.

Long lines wait to access the skydeck at Queen's Wharf on Friday

Star Entertainment chief executive Steve McCann and his board are now locked in crisis talks with bankers and government representatives in an attempt to nail down a refinancing deal that could raise up to $300m. People close to the company say the “sharks are circling” the weakened company with concerns it will be broken up.

But the financial crisis has not stopped big crowds converging on the new Queen’s Wharf project

On Friday, there was a long line to catch the lift up to the Queen’s Wharf sky deck that offers panoramic views of Brisbane. Crowds were thinner in the casino on level five but there was a large line-up to get into the cafes.

Most of the terrace deck that will include both retail and restaurants remains largely a construction site as workers put the finishing touches to eateries including the Gambaro family’s popular Black Hide steakhouse due to open on September 11.

Originally published as Casino group Star Entertainment in emergency rescue talks with financiers over the weekend