Star Entertainment secures $200m loans but Miles rule out tax relief over executive bonuses
Star Entertainment has secured a $200m rescue package, but doubts linger about the troubled casino operator’s future as Miles threatens to walk away from promised tax relief.
The Queensland government has threatened to pull out of plans to provide tax relief for troubled Star Entertainment, only hours after the debt-laden group secured $200m in emergency funding.
Premier Steven Miles said the government had no role in securing Star’s lifeline, and it was unlikely to reach any kind of agreement on a deferral of tax payments. The payment of generous executive bonuses has emerged as a sticking point for any tax relief.
“There’s been no agreement whatsoever reached there, and we’re unlikely to reach one,” Mr Miles said. “Frankly, I find it astounding that they would be asking the state to defer taxes, to delay the payment of taxes while paying themselves performance bonuses. We’re going to put the taxpayers of Queensland ahead of those executives.” It is understood talks between Star and the government are continuing.
The Premier said any possibility of a future agreement would involve a tax deferral arrangement only. “There may be consideration of the timeframe in which they could be paid, or should be paid, but we won’t be entertaining that discussion until they agree not to pay performance bonuses,” he said. “We want every single dollar of tax to be paid.”
Star said that corporate lenders had agreed to a new debt facility in two-tranches of $100m each. The group’s existing $450m facility has been reduced to $334m, which is fully drawn, Star said in an update to the market late on Wednesday.
The first $100m tranche will be available to be drawn, subject to conditions, from the end of October to December 20, 2024. The second tranche will be subject to more extensive conditions. The funds are being provided at an annual interest rate of 13.5 per cent, considerably higher than normal commercial rates.
The company has faced a perfect storm over the past month after a second NSW Independent Casino Commission inquiry by barrister Adam Bell SC found that Star was continuing to fail the standards required of a casino operator. The financing deal Star has stitched together should satisfy one of NICC’s major concerns – that the embattled casino group has enough financial support to keep its operations going.
Veteran Queensland stockbroker and fund manager Charlie Green said it may be time to pull the life support machine on Star, which had become an “omnishambles.” Mr Green, who does not own Star shares, he was surprised that asset sales are not being more vigorously pursued by Star, given the “loan shark” 13.5 per cent interest rates attached to the rescue plan.
“Put it this way: most people I know running a family budget would be looking to sell assets rather than borrow at these sort of interest rates,” he said.
“The board has a Sisyphean task ahead, so it’s time to regroup and pull the plug on new management.
“They need start all over before someone else – be it a lender, regulator, or the new Queensland government – exercises the gaming industry equivalent of an advanced medical directive to turn off the company’s life support.
“Maybe then the shareholders and staff would have a chance. If the company assets were sold as going concerns, it wouldn’t be a fire sale. There’d be a conga line of buyers for the wonderful assets they own. If it was any other small cap company, without all the political hoo-ha, it would have been put into administration months ago.”
It is understood that Star wants to retain attractive remuneration packages, including bonuses, after hiring a string of former executives from rival Crown to rebuild its operations.
Former Crown Resorts boss Steve McCann was picked in June to lead Star out of its regulatory quagmire with a $10m salary package that included a $2.5m sign-on bonus and $5m worth of performance rights.
Subject to shareholder approval, Mr McCann also will get $5m in sign-on performance rights as a once-off grant, which will vest three years after his joining date.
That will be subject to Mr McCann, a former chief executive of Lendlease, not resigning or being terminated by the company for cause within the three-year period
Star also has tapped former Crown Melbourne chief operating officer Mark Mackay to head the company’s Gold Coast property. Mr Mackay, who was responsible for managing the operation and strategic direction of Crown Melbourne, had a previous stint as chief operating officer of The Star Gold Coast, then Jupiters Hotel and Casino. Star chief operating officer Jeannie Mok joined Star in June after previously serving as chief transformation officer for Crown Resorts.
NSW appears to have cold-shouldered an approach by Star for help, saying it was the responsibility of the company to maintain the financial viability of its business.
The NICC issued a show cause notice against Star this month that could result in a $100m fine and the loss of its Sydney casino licence.
The NICC wants a response as to why it should not take disciplinary action against Star in respect of breaches substantiated in the Bell II report, which included failure to run source of wealth checks on hundreds of members flagged as high risk, and fraudulent guest welfare entries which put already vulnerable customers at higher risk of harm.
Star said it expects to respond to the NICC by Friday.
It plans to release its unaudited accounts for the period ended June 30 on Thursday.
The stock could also resume trading this week. The company requested that its shares go into a trading halt in late August as it considered the Bell II report.
WAM Leaders fund managers said Star was one of the worst performers in their portfolio last year, with its shares slumping 43 per cent.
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