Bally’s warns Austrac fine threatens Star rescue deal

US casino giant Bally’s Corp says it may be forced to walk away from a rescue deal for beleaguered Star Entertainment if Austrac imposes a threatened $400m money laundering fine on the group.

Bally’s chairman Soo Kim says Austrac fine ‘could be a problem’

US casino giant Bally’s Corp says it may be forced to walk away from a rescue deal for beleaguered Star Entertainment if the financial crimes watchdog Austrac imposes a threatened $400m money laundering fine on the group.

Austrac wants the fine imposed to punish Star for years of poor oversight that allowed money-laundering and other breaches to occur in its flagship casinos. Federal Court judge Cameron Moore is set to hand down his judgement in the case later this year after a trial last month.

Bally’s Corp chair Soo Kim told the Inside Asian Gaming website this week that an excessive fine would likely make its $300m rescue deal with pubs billionaire Bruce Mathieson untenable. Star says a fine in excess of $100m could push it into insolvency.

The development comes as Star seeks to salvage a separate deal to sell its stake in Brisbane’s Queen’s Wharf precinct to raise much needed cash and reduce debt.

Mr Kim told the influential Macau-based industry website that a “conditions precedent” to Bally’s making its final investment in Star was that it was a solvent company.

“We obviously got a solvency opinion based on the facts at the time,” Mr Kim said. “We are looking forward to getting involved in (Star) and exerting the sort of management influence that we believe this company needs to turn around, but there are scenarios where we’re not going to be able to do that. So let’s hope that those scenarios don’t play out. Potentially what the regulators have asked for, that could be a real problem.”

Further comment has been sought from Mr Kim.

Star Entertainment shareholders last week overwhelmingly approved the rescue deal led by Bally’s after being warned they would get nothing if the company collapsed into liquidation. Chair Anne Ward told a shareholder meeting held to approve the transaction that the company had “exhausted all options” to secure funding for its survival and the Bally’s deal was the only offer on the table.

Bally’s Corp chair Soo Kim

Bally’s meanwhile is facing its own financial challenges in its home market and has faced credit downgrades this year amid soaring debt levels and falling revenue.

Bally’s is building a giant $US1.7bn ($2.7bn) casino complex on the Chicago River that could strain its future finances. Greek gaming technology firm Intralot this week agreed to acquire Bally’s interactive division in a cash-and-stock transaction valued at 2.bbn euros ($4.77bn).  Bally’s says the deal will unite the two firms’ “gaming and data technology with Intralot’s exceptional expertise in lottery.

The deal with Bally’s is not the only transaction Star needs to stave off its ultimate collapse.

Hong Kong-based Chow Tai Fook Enterprises and Far East Consortium International this week gave notice to Star that it wanted to terminate their purchase of Star’s 50 per cent stake in Queen’s Wharf. The firms, which are joint venture partners with Star in the debt-laden integrated resort, say the deal has to make “commercial sense.”

The termination will come into effect in a week unless Star can revive the agreement and get it back on track. The Queensland Government wants to ensure any changes in ownership at Queen’s Wharf does not impact on thousands of workers employed at the precinct, which opened last September two years behind schedule and mired in debt.

A spokesperson said the Crisafulli Government remained committed to “working with all parties involved in respect of the future of The Star.” “Our priority, as always, is on the workers,” the spokesperson said.

The deal to sell Queen’s Wharf would allow Star to get up to $1bn of debt off its bottom line and raise much needed cash to keep some operations going.

Originally published as Bally’s warns Austrac fine threatens Star rescue deal