Star is committed to selling its Queen’s Wharf development despite a new rescue offer

Star Entertainment is committed to offloading its Queen’s Wharf precinct in Brisbane to its Hong Kong partners despite an 11th-hour rescue offer from US-based Bally’s Corp.

Star Entertainment chief Steve McCann, Star Sydney and, left, Queen’s Wharf in Brisbane.

Star Entertainment favours offloading its Queen’s Wharf precinct in Brisbane to its Hong Kong partners despite an 11th hour rescue offer from US-based international casino group Bally’s Corp.

Bally’s, headed by New York hedge fund manager Soo Kim, is offering to recapitalise Star with $250m, under a deal in which it would take control of the company.

Star sees the Bally’s unsolicited offer as a positive because it underscores continued interest in the company, but it is unlikely to derail the Queen’s Wharf deal and a new refinancing proposal unveiled last week to keep the business afloat.

It is understood Star chief executive Steve McCann wants to ensure any new offer does not imperil exclusivity arrangements contained in the deal already on the table.

Star on Friday announced plans to sell its stake in Queen’s Wharf and other assets to its Hong Kong joint venture partners Chow Tai Fook and Far East Consortium for $53m plus the acquisition of two luxury hotel towers at the Star Gold Coast.

Star is disappointed that after all the hard work and capital that it put into Queen’s Wharf it has had to exit at a loss. But it was clear that in the company’s discussions with existing and new lenders, the costs associated with continuing with the precinct were not sustainable given its current balance sheet and liquidity problems.

Star is seeking access to more than $1bn in financing to shore up its liquidity, including a $250m bridge funding facility and a refinancing proposal that would translate to a $940m credit lifeline.

Star is currently undertaking due diligence on the refinancing proposal that could run until March 18. It could still be extended by a week, but time is crucial for the cash-strapped company if it is to avoid calling in administrators. If Star can secure the refinancing proposals already on the table, that is considered the best thing for the business.

Bally’s is headed by New York hedge fund manager Soo Kim.

If Bally’s proposal can work in parallel with the existing offer, that also will be considered. Star has been aware Bally’s has been looking at the company for some time.

It is focusing on the refinancing proposal to ensure it gets to a position where there’s enough cash to navigate its future. It is understood that Star believes it is in a much better position to avoid administration than it was only days ago. The deal with the HK partners provides a level of security for staff but it does not want to declare victory prematurely.

Far East Consortium said it was not in a position to comment on any market speculation about the Bally’s offer but it remained firmly committed to Queen’s Wharf and its employees.

“The transaction announced on Friday is a critical step in securing QWB’s long-term viability and supporting the local businesses that rely on this world-class tourism, leisure, and entertainment destination,” it said. “Under joint ownership with its long-term partner Chow Tai Fook Enterprises (CTFE), QWB is well positioned to continue thriving.”

Mr McCann said after the deal was announced on Friday that the arrangements would contribute to “providing a potential pathway towards financial viability”.

“There are still a number of challenges that we need to address, including progressing short and long-term liquidity for the company,” Mr McCann said.

“While there is more to do to have access to the funding from the bridge facility and the refinancing proposal, these initiatives improve our capacity to have a viable future.”

It still needs to get bondholders as well as regulators to consent to the various proposals.

Both the NSW and Queensland governments say they are focused on keeping the doors open at Star in any administration scenario.

But for that to happen there would need to be arrangements to fund the cost of the administration.

The Queen’s Wharf casino development in Brisbane.

In such a scenario, administrators would have to move fast to sell-off the company’s assets throwing into doubt up to 2700 jobs.

Star’s pivot from Brisbane to focus primarily on its Gold Coast property, as well as Sydney, followed discussions with Chow Tai Fook and Far East Consortium about acquiring their stakes in the Dorsett and Andaz hotel towers at Star Gold Coast.

The acquisition means Star has complete control over the future development of Star Gold Coast including valuable freehold land for future development. Star realises it still has a lot of work to do to turn around its Sydney business including stabilising its operating systems and improving customer service.

Star Sydney’s customer experience needs to radically improve for gamblers and guests, a fact which management is alert to.

The Australian revealed on Monday that Bally’s wrote to Star chair Anne Ward proposing “an alternative path” to the bailout finalised last Friday.

Bally’s said the company would “move quickly and enter into a binding agreement” to recapitalise Star.

It has offered $250m raised through convertible notes subordinated to Star’s principal lenders. The notes would be convertible into a minimum of 50.1 per cent of Star’s fully diluted ordinary shares, giving Bally’s control. Star shares have not traded since February 28 when it failed to lodge its financial accounts on time.

“To be clear, we remain very open to discussing a larger transaction depending on our discussions with respect to Star’s liquidity and capital needs,” Bally’s wrote. “Our proposal is fully funded and not subject to any financing contingencies.”

Originally published as Star is committed to selling its Queen’s Wharf development despite a new rescue offer