Sparse crowds add urgency to cash-strapped Star Entertainment’s negotiations with lenders
The crowds are sparse at Star Entertainment’s flagship casino adding urgency to the cash-strapped group’s negotiations with lenders and governments as it fights for survival.
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Star Entertainment Group is heading towards a potential break-up or blow-up as regulators and bankers closely watch the ASX-listed gaming and hotel operation, with governments warning no more help would be extended to the teetering casino business.
Insolvency industry figures are also keeping a watching brief on Star, with speculation mounting the beat-up gaming group will face a fire-sale or even administration as cash rapidly leaves its accounts.
A collapse could see Star as the first Australian casino failure since 1998, when the Christmas Island casino shut its doors after its license was pulled.
Once among Australia’s most profitable casinos, the Christmas Island casino was smashed by the Asian Financial Crisis and loss of Indonesian high rollers after the collapse of the Suharto regime.
Star is now warning shareholders its cash is dwindling, with analysts warning the gaming group may be broken by February.
Star warned shareholders on Friday it had tapped more than $70m of its financial lifeline, with just $79m left in the bank at the end of December.
This comes after Star drew down half of a $200m lifeline announced last year, with doubts the gaming group will be able to access the second half, backed by a consortium of lenders including Barclays and Westpac.
Star could tap another $100m from a consortium of banks and lenders, but the gaming group must first raise an additional $150m as well as meet a series of other conditions, with sources noting negotiations between the two sides were getting “hot”.
Analysts have warned Star would be lucky to last until the end of February under its current cash reserves, with warnings looming regulatory fines will punch a hole in its already weakened balance sheet.
Star has provisioned $150m to cover potential Austrac fines for breaches of money laundering laws.
Austrac fined Crown $450m for its breaches.
The trouble surrounding the gaming group puts at risk thousands of jobs across its Sydney, Brisbane, and Gold Coast operations.
But, governments in Queensland and New South Wales have both pushed back on any further support for Star, with the Federal Government also noting its concern over the escalating situation but noting no requests for help had been made yet.
Queensland Premier David Crisafulli told media he was focused on the future of workers at Star’s two Sunshine State sites.
The Premier noted “something is inevitable” for The Star, but cautioned he was not making any prediction “one way or another” as to the future of the former heavyweight gaming giant.
“My focus is not on the corporate suits in Star or the financiers, my focus is on the many households of people who work there,” Mr Crisafulli said.
“We’d be sending the clearest of clear messages that whatever happens, continuity of clear employment is my number one priority.“
Thousands of Queenslanders work across Star’s two sites in Brisbane and the Gold Coast.
The Star’s recently completed $3.6bn Queen’s Wharf precinct in Brisbane has been a major draw on the group’s resources, representing a significant investment in the Sunshine State for the Sydney-based business.
But, Star’s Pyrmont casino, on Sydney’s western flank, also represents a major vulnerability for the group and the state, with thousands of staff working across the sprawling site.
While many in Sydney continue to flock to The Star, visitor numbers were soft when The Australian visited on Sunday with many vacant gaming tables and empty restaurants and cafes.
What should be a peak period for The Star, as Sydney basks in a flood of overseas tourists, was not reflected in its gaming areas with players now limited to $5000 daily limits, soon set to drop to $1000 per day later this year.
On Sunday NSW Premier Chris Minns said no further support was coming for The Star, after deferring poker machine duty rates and delaying limiting bets to $1000 per day last year.
Star also sought further temporary tax payments relief from NSW last year.
But, Mr Minns said no further support would be coming, noting Star had pledged to maintain more than 3000 jobs in NSW until 2030 under the earlier deal.
“Other than that, it has to be run on commercial grounds, and it’s a matter for Star, their ownership and their management,” he said.
Both the corporate regulator and the NSW casino regulator are closely watching Star’s travails.
An Australian Securities and Investments Commission spokesman said the agency was monitoring the situation at Star.
ASIC is already suing Star and 11 former directors over continuous disclosure breaches to investors, after allegedly failing to focus on money laundering and criminal associates as well as allegedly providing false information to National Australia Bank about the use of China Union Pay cards at its premises.
ASIC alleges more than $900m was withdrawn by players using these cards over a six-year period.
The NSW Independent Casino Commission is also closely watching the unfolding financial crisis at Star, with the agency in close contact with its boss Steve McCann.
The NICC clashed with Mr McCann’s predecessor Robbie Cooke and former chair David Foster.
A former casino industry figure said Star’s Sydney site was likely to be sold to Blackstone if the gaming group couldn’t pull itself out of its nosedive, noting the American asset managers were a natural fit for the Pyrmont property.
This could leave Pyrmont a mass table-gaming and pokies operation, while the Crown Barangaroo casino would then become an up-market and high-rollers operation.
Star had originally targeted its Queen’s Wharf site in Brisbane at Asian high rollers, but industry figures noted this line had become increasingly challenged and offered limited upsides given low margins.
The imposition of Know Your Customer rules has also slimmed down suburban gambler visitors to Star’s Sydney site, with the Casino’s three Express bus routes unable to capture many players now heading to local pubs and clubs with less stringent rules.
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