Australia’s Star Entertainment Group is said to be urgently seeking additional funding as well as tax relief from state governments in NSW and Queensland in order to stave off financial collapse following the public release last week of the second Bell Report into the company’s suitability. The report found that Star is still unsuitable to hold a casino license for The Star Sydney, although the regulator has not yet determined what action it will take in response.
According to local media reports, Star – which postponed publication of its FY24 financial report last Friday given the timing of the Bell Report – has spent the past few days in urgent talks with its lenders to provide relief around loan repayments. The company is also said to be considering another round of equity raising – its third in as many years – and to have asked state governments for further tax relief ahead of another period of uncertainty.
Star entered into a trading halt last Friday, while the ASX on Monday suspended Star’s securities from quotation pending lodgement of its financial results.
The company has faced challenges on multiple fronts since the first Bell inquiry in 2022 found the company unsuitable due to serious lack of compliance, including the illegal use of China UnionPay cards to fund gambling at The Star Sydney, its dealings with Asian junket operator Suncity Group and the company’s response to independent audits of its anti-money laundering (AML) and counter terrorism financing (CTF) controls.
The mandatory implementation of cashless gaming technology and increased regulatory requirements have seen operational costs blow out, while visitation and player spend – particularly in the premium gaming segment – has plummeted.
Star is also facing multiple shareholder class actions and has set aside AU$150 million to cover a looming action by Australia’s AML watch dog AUSTRAC.
Although the NSW government last year agreed to defer the implementation of a significantly increased tax on poker machine revenues, Star is still in need of further relief.
According to the Australian Financial Review, Star is preparing to announced an AU$1.4 billion write-down of its casino assets and yet another major cost-cutting program, having last year let go of 500 staff nationwide to reduce expenditure.
The company is also said to be exploring a convertible notes issue with major shareholders to raise up to AU$300 million, or possibly increasing the size of its credit facility.
There has long been talk that Star could divest and split up its assets or contemplate a sale in the vein of local rival Crown Resorts’ acquisition by Blackstone, however IAG understands a handful of international casino operators who looked into Star have since opted out.
Macquarie analysts have also questioned the short-term outlook for Star, particularly from an investment standpoint, stating in a note that, “Star Entertainment has attractive long-duration casino licences across Queensland and NSW, but there are near-term uncertainties on the earnings, and a long list of outstanding issues which need to be cleared before we can get comfortable with the investment thesis.”
This latest setback comes at a time when Star should be celebrating the long-awaited launch of its new AU$3.6 billion Queen’s Wharf Brisbane development, which held its Grand Opening last Thursday.
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