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Star Entertainment Group’s board unanimously backs a AUD300 million rescue package. The troubled Australian casino operator needs shareholder approval at next month’s meeting.
Two companies are stepping up with cash. Bally’s Corp, a US-based casino business, and Investment Holdings Pty Ltd, an Australian conglomerate, are the joint rescuers.
Grant Samuel & Associates served as the independent advisor on the deal. They told shareholders they’d be “clearly better off” if the transactions go through.
The company runs The Star Sydney and The Star Brisbane casinos. Both properties have been struggling financially.
Without this rescue package, Star Entertainment faces an uncertain future. The board says they’re recommending the deal “in the absence of a superior proposal.”
Grant Samuel’s report highlighted some concerns though. Bally’s carries over US$3 billion in gross borrowings, with US$1.8 billion due in 2028.
The deal involves convertible notes and subordinated debt worth AUD300 million total. Bally’s originally planned to provide the full amount.
But Investment Holdings, Star Entertainment’s largest shareholder, jumped in too. They committed to AUD100 million of the package on similar terms.
This cuts Bally’s portion down to AUD200 million. An initial AUD100 million tranche already hit Star Entertainment’s accounts on April 9, split equally between both investors.
If the convertible notes get converted, both Bally’s and Investment Holdings will own over 20% each. Combined, they’d control more than 50% of the company.
That triggers Australia’s Corporations Act requirements. Shareholders must approve any deal that gives investors this much control.
There’s a backup scenario too. If Investment Holdings’ own shareholders reject their participation, Bally’s could end up controlling 54% of Star Entertainment alone.
The June 25 general meeting in Sydney will decide everything. Shareholders get the final say on whether this rescue plan moves forward.
Grant Samuel noted one red flag about Bally’s experience. The US company has never operated casinos in Australia and limited experience with large resort complexes that include non-gaming elements.
Samuel said: The sheer amount of debt Bally’s carries raises a question as to whether it has sufficient financial firepower to participate in any significant follow-on capital injections if that is required by The Star.”
Samuel also claimed that Bally’s has no previous experience in the casino sector in Australia or large resorts with non-gaming components.
Star Entertainment’s financial strain has been ongoing throughout the year. The company recently announced it failed to sign off on its half-year accounts due to a shrinking cash position. Bally’s and Investment Holdings’ rescue plan follows multiple failed funding attempts for Star Entertainment and the recent sale of its interest in the Queen’s Wharf Brisbane project.
