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Star Entertainment received a termination notice from its Queen’s Wharf joint venture partners on Monday. Far East Consortium and Chow Tai Fook Enterprises sent the notice that becomes effective July 7.
The three companies formed a joint venture for the multibillion-dollar Brisbane development. Star owned 50% while the other two partners split the remainder.
Star announced plans to exit the venture in March. The company agreed to sell its stake for AU$53 million to its partners.
Bally’s Corp is currently acquiring Star Entertainment. Chairman Soo Kim previously opposed the Queen’s Wharf exit but the deal proceeded anyway.
The original deal set an April 30 deadline for long-form documentation. Star didn’t meet this requirement, though the company didn’t announce the missed deadline independently.
The information was buried in Star’s general meeting notice from late May. After the deadline lapsed, all parties gained the option to exit the agreement.
Star’s financial troubles drove the original exit decision. The company needed to escape hundreds of millions in equity and debt commitments tied to the development.
Queen’s Wharf only opened last August. But Star’s regulatory problems created cash flow issues that made the exit necessary.
Star must repay AU$10 million to the joint venture partners within 30 days. The payment gets split equally between Far East Consortium and Chow Tai Fook.
If Star doesn’t make the payment on time, it forfeits its stake in a Star Gold Coast hotel tower. The partners also won’t make a separate AU$8 million payment to Star.
Star says it remains willing to continue negotiations. But Far East Consortium’s statement contained no similar language about ongoing talks.
The company’s statement focused on restoring all parties to their pre-deal positions.
Star faces multiple regulatory challenges beyond this deal. AUSTRAC is seeking AU$400 million in penalties for anti-money laundering violations.
The company’s Sydney and Gold Coast casino licenses are suspended. Both properties operate under state-appointed management.
Star’s attorney told regulators the company can only afford a AU$100 million fine. He said that amount represents “all the money that we have and reasonably anticipate being able to borrow.”
Bally’s completed its takeover of Star on June 25. Kim told reporters that Star’s three casinos “work together” and management matters more than ownership structure.
But keeping Queen’s Wharf might actually help the new owners. The development represents long-term value despite Star’s current cash needs.
Last week, Star Entertainment received shareholder approval for a AU$300 million capital injection that was targeted at safeguarding the company’s stability in the midst of growing financial uncertainty. The approval was granted on 25 June at the general meeting.
