Can On February 28th, it was reported that Star Entertainment was seeking a cash injection into their casino business to avoid an imminent collapse. There was news of a worsening of its financial position. It assured the ASX (Australian Stock Exchange) that it was expecting one or more liquidity proposals so that it could continue trading.
They told shareholders there was ‘material uncertainty about the group’s ability to continue as a going concern’. Shareholders had been holding out for a knight in shining armour to come in as an investor or for the group to sell assets or access new borrowing streams to prevent closure.
Star, operates land-based casinos in Sydney, Brisbane and the Gold Coast and has been teetering on the brink of collapse for some time. The group has cited declining revenues, licensing problems and significant operational disruptions. The whole sorry business came to a head when it failed to lodge its scheduled financial accounts and entered a trading halt. That meant that investors could no longer trade their shares and indicated that it could not guarantee its financial liquidity to keep trading.
The group confirmed it was “continuing to explore possible solutions that it hoped would materially increase the group’s financial liquidity position”.
It all seems somewhat ironic that a gambling operation should be unable to operate profitably in a country that is home to the world’s “biggest gamblers”. Maybe what it offers is not what the country is looking for. There is no doubt that increased pressure from online casinos is giving gamblers a very convenient alternative. From the comfort of their homes or via mobile apps on smart devices, players are able to game and gamble without having to go out of their way.
The online operators are all too aware that their games are popular and offer promotions and rewards to attract customers and keep existing ones loyal. From free spins with no deposit needed to deposit-match bonuses, they offer attractive opportunities that land-based outlets struggle to compete with. While a casino night in is very different from a casino night out, Star’s business is rooted in the latter. However, judging from the interest surrounding the situation, it is clear that no one wants the business to fail.
Star employs around 8,000 people, and it is thought that the casinos would continue to operate if the business went into administration and a new owner was sought. The alternative is that the company could be broken up. However, it is not expected that it will cease to exist – just that it will be differently structured financially.
However, while Star scrambled in search of liquidity injections, it is notable that its problems are not entirely domestic. There has been a notable decline in Asia’s big spenders. It was found that Star had exposed itself to possible money laundering schemes after it had accepted hundreds of millions of dollars in banned transactions. At the time, the regulator defended their decision not to revoke the group’s operator license but to impose a fine instead.
However, the historic $100 million fine did little to help the business’s precarious position, and it also suffered massive construction overspends when developing its new Queen’ Wharf facilities in Brisbane. Before the suspension shares were trading around the 12c mark, down from $5 in 2018.
With Brisbane hosting the 2032 Olympics, the last thing anyone wants is its postcard tourism precinct, to have a non-functioning casino at its heart. It is also deemed essential that jobs are protected. The Queensland and NSW governments both issued statements about the situation.
NSW government senior minister Penny Sharpe said can
“Star has to maintain itself as a viable casino … we’ve obviously been working with them over a period of time on a range of issues, including the importance of the employment that is there, and will continue to do so”.
Queensland Premier David Crisafulli was very clear about what he wanted to happen, but he seemed ambivalent about the structure and ownership.
“My non-negotiable is that place has got to stay open,” he said. “If whoever runs it in the future wants to talk to us about what future opportunities look like it … it is about the workers.”
Forbes has reported that the casino group is considering a $250 million cash injection from Bally’s Corp. The cash offer came with significant strings attached as the US casino operation was seeking to take a controlling interest in the Australian operator.
Their unsolicited bid came about after Star has been busily selling assets to stay afloat. This included selling its 50 per cent stake in the Queen’s Wharf casino for £53 million and event space in the Sydney precinct for $60 million. Bally’s, however is keen to maintain the current asset base.
Bally’s CEO Robeson Reeves, alongside President George T. Papanikeeper, is reported as saying that Bally’s was not “troubled” by the deals Star was currently making to sell its assets but that they wanted to “keep everything together rather than strip it apart.”
Reeves told reporters
“We think that things tend to operate better if they’re one larger organisation where you can actually generate benefits for each of the properties one by one by making one tweak in one place.”
Mr Papanier added that Bally’s did not want to see Star entering administration as that option had the potential to be “too unpredictable” to deal with. He reiterated that the American gaming group were looking to acquire all of the group’s assets.
“We’re interested in all three assets and we’ll have to work through the can process to understand exactly how we can position the acquisition of all three properties, understanding that probity is a big issue that we want to overcome.”
The level of interest from potential investors and the authorities is a testament to canthe importance of the gambling industry to the Australian economy. It is so much more than just a few people playing around on the pokies. It seems very unlikely that the current cash problems will see Star close its doors or shroud can the gaming tables.
While its ownership structure is still very much up in the air, it seems there is more canthan enough will and money to keep it afloat and thriving. The battle is on for who is in control and how the business will be structured in the future.
