AFR article:
Star Entertainment’s board and auditors are set to sign off on its annual financial accounts after securing a critical multimillion-dollar bailout package.
The ASX-listed casino operator late on Wednesday confirmed a report in The Australian Financial Review that it had secured funds from its lenders in exchange for security over assets, including properties.
Star, which owns casinos in Sydney, Brisbane and the Gold Coast, is now expected to release its financial results for the year ending June 30 as early as Thursday morning, ending a tumultuous period that threatened the existence of its three flagship casinos.
Star Entertainment has won a lifeline. Bloomberg
The deal puts an end to four weeks of emergency talks between newly installed Star chief executive Steve McCann and lenders, investors, and state governments.
Mr McCann, who joined Star in July, was trying to offset a cost blowout at the newly opened Queen’s Wharf in Brisbane, which would have put the casino in breach of lending rules.
Star’s five-point rescue plan, revealed by The Financial Review last week, includes a two-tranche extension to its loans. The first tranche is an immediate $100 million injection to meet urgent cost blowouts at Queen’s Wharf.
A second tranche, worth about the same, will be available to Star if needed but is conditional on the company raising at least $150 million from other sources.
Star said it would pay 13.5 per cent interest on its new loan and existing debts. Star’s lenders have also agreed to waive debt covenants for the next two testing dates – September 30 and December 31.
Sources with direct knowledge of Star’s bailout plan, not authorised to speak publicly, said it also includes tax relief in Queensland, cost cuts, asset write-downs, and the sale of assets, including the former Treasury Casino in Brisbane, which sold for $67.5 million. In total, the package is worth between $300 million and $350 million.
The Queensland government is expected to provide more than $60 million in tax relief for unpaid and incoming payments. The relief is being provided on the condition no bonuses are paid to Star executives until the money is paid back in full.
Star’s bailout comes weeks after Mr McCann pitched his turnaround plan to lenders and major shareholders in a bid for financial flexibility.
Last month, he told lenders and investors he did not believe Star had enough cash to fund the cost blowout at Queen’s Wharf, increased remediation costs, and a potential multimillion-dollar fine from financial crime regulators for breaches of the anti-money laundering and counter-terrorism laws.
These costs have coincided with a reduction in the number of patrons visiting and spending money at venues and the introduction of cashless card gaming. Star shares have not traded on the ASX since August 29 when the funding talks were revealed.
Star’s bankers considered other capital raising ideas, including the sale of convertible notes and super senior debt that would sit on top of the lending group’s $330 million senior secured loans.
The board also negotiated with US asset managers such as Oaktree Capital Management and Cerberus Capital Management, which were willing to offer a far larger cash injection at a higher interest rate.
Star CEO Steven McCann has held crisis talks for weeks. Dominic Lorrimer
Star already has $450 million of debt, negotiated last September, which sits with companies including Barclays, Westpac, Deutsche Bank, Macquarie, Perpetual, Washington H. Soul Pattinson and Regal Partners.
Lenders, advised by McGrathNicol and Gilbert + Tobin, wanted formal security over Star’s Sydney property as part of their commitment to tip in fresh funds. Some were frustrated that security had not formally been granted nearly one year after they had bankrolled $450 million in debt. Star is required to provide this to receive the initial $100 million from its lenders.
The package will come as a welcome relief for Star investors, including Wilson Asset Management, which called on Mr McCann to sell more assets to recoup losses for battling shareholders. Shareholders tipped in $1.5 billion of equity across two raisings last year, only to see the company unable to sign its accounts for the 12 months to June 30.
Star, which was advised by UBS and Barrenjoey, expects to report revenue between $1.68 billion and $1.69 billion, and earnings between $165 million and $180 million for the year to June 30. It posted revenue of $1.9 billion and earnings of $317 million last year.
The casino operator first stopped trading in August after the release of a report, authored by Adam Bell, SC, into its ability to run the Sydney casino precinct, and reports it was preparing to announce a $1.4 billion write-down of its casino assets and a major cost-cutting program.
Mr Bell’s report was scathing of Star’s previous board and management, and found multiple compliance breaches, but was optimistic about the future of the Sydney precinct under Mr McCann, who had turned around its rival, Crown Resorts, before it was sold to investment giant Blackstone for $8.9 billion.
Star’s shares are expected to resume trading this week.
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https://www. afr .com/companies/games-and-wagering/star-entertainment-set-to-sign-financial-accounts-as-bailout-finalised-20240925-p5kdc2#:~:text=In%20total%2C%20the%20package%20is,is%20paid%20back%20in%20full.
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Tourists and locals at Queen’s Wharf in Brisbane this week. But much of the complex is still closed, and is opening in stages.
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Star’s Queen’s Wharf comes to life – unless you want to shop or eat
New Star Entertainment CEO Steve McCann’s fix-up job has barely begun.
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Zoe Samios covers wagering and the business of sport from the AFR's Sydney newsroom. She was previously the media and telecommunications reporter for The Sydney Morning Herald and The Age, and covered media at The Australian. Connect with Zoe on Twitter. Email Zoe at zoe.samios@copyright link
Anthony Macdonald is a Chanticleer columnist. He is a former Street Talk co-editor and has 10 years' experience as a business journalist and worked at PwC, auditing and advising financial services companies. Connect with Anthony on Twitter. Email Anthony at a.macdonald@copyright link
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