By Colin Kruger
Star Entertainment has managed to avoid financial collapse for now after signing a deal to sell its stake in Brisbane’s Queen’s Wharf casino to its two equity partners along with other assets.
The Far East Consortium said on Friday that it and Chow Tai Fook Enterprises will now take full control of the facility after paying $53 million for Star’s 50 per cent share. Star will also receive $5 million a month to run the casino, rising to $6 million a month as of next year.
The Queen’s Wharf casino complex in Brisbane has delivered a financial lifeline to Star Entertainment.Credit: Glenn Campbell
“The QWB Project is a world-class entertainment and leisure precinct in the heart of Brisbane’s central business district, one of Australia’s fastest growing cities and the host of the 2032 Olympic and Paralympic Games,” Far East said.
The agreement, first reported in The Australian Financial Review, is still subject to approval from Star’s regulators and lenders, according to Far East. The targeted completion date for the deal is June 30.
The announcement said the JV partners will also take ownership of Star’s Treasury Hotel and car park in Brisbane.
The transaction structure and specific terms “remain unclear” said Far East, which will receive an $18 million break fee from Star if the deal fails.
An announcement is expected from Star. The deal will give the company breathing room to find the funding needed to survive a massive cash crunch after Star lost the support of both its investors and lenders.
Star was expected to run out of cash this week but managed to pay its 8000 staff in recent days.
Chief executive Steve McCann praised them in an internal email on Friday for their work in “extremely challenging circumstances”. He added that the company will be able to keep paying staff “while our business operations continue.”
Star has had other funding offers. This includes its major shareholder, pokies billionaire Bruce Mathieson, offering to buy its Gold Coast casino.
US financial giant Oaktree also offered to refinance Star’s debt if it could reach agreement with Star lenders owed more than $450 million, and provide up to $650 million of fresh funding. The deal was subject to numerous conditions and there was no guarantee it would progress, Star said.
Star Entertainment was suspended from trading by the ASX on Monday over its failure to lodge financial statements for the December half-year.
The board was unable to sign off on the accounts as a going concern as the group had not been able to secure financing to ensure it won’t run out of cash as early as this week.
“As noted in the company’s recent ASX announcements, there remains material uncertainty as to the group’s ability to continue as a going concern,” it said.
Star shares last traded at just 11¢, valuing the group at about $300 million, compared with a peak of $5 billion.
Star continues to face cost challenges that include the multimillion-dollar legal bills of its former board members who are now before the Federal Court facing civil action by the Australian Securities and Investments Commission (ASIC).
ASIC has accused them of not paying sufficient attention to the risks of money laundering and criminal association that have financially crippled the casino operator with massive fines and gambling restrictions on its pokies.
The company faces a fine from AUSTRAC that could exceed $300 million.
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