Bally’s Proposes Financial Rescue Plan
it Entertainment has received an unexpected $250 million funding offer from US gaming giant Bally’s Corporation. The proposal would give Bally’s a controlling 50.1% stake in the struggling casino operator.
Figure 1: it manages casinos in the Gold Coast, Brisbane, and Sydney. [NewsWire / Glenn Campbell]
Bally’s submitted the offer in a letter to Star’s board on Monday, calling it “an alternative path” to the company’s current restructuring plan.
“We firmly believe that our approach… of new long-term capital plus operational track record will unlock the best alternative for Star and its shareholders,” Bally’s said in its proposal.
The offer comes as Star fights to stay afloat, following months of financial uncertainty, regulatory scrutiny, and declining revenues.
It’s Ongoing Financial Struggles
Last Friday,it announced a major restructuring deal to avoid collapse. The agreement included selling its 50% stake in Brisbane’s Queen’s Wharf casino to Hong Kong investors Far East Consortium and Chow Tai Fook Enterprises for $53 million.
Star also secured a $250 million bridging loan from US hedge fund King Street Capital Management and arranged a debt refinancing deal worth up to $940 million.
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Despite these moves, the company remains in financial distress. Star’s shares have been suspended from the Australian Securities Exchange (ASX) since last week after it failed to submit its half-year financial results. The company admitted it lacked sufficient funds to continue operations without immediate financial support.
Bally’s Plan for Star’s Future
Bally’s sees its proposal as a better alternative to it’s current restructuring plan. The US gaming company has offered a $250 million capital raising plan underwritten by Bally’s, in exchange for a 50.1% stake in Star.
Bally’s chairman Soo Kim outlined the company’s vision for Star, stating:
“Our strategy for Star is built on the simple premise that keeping in place Star’s current businesses, assets and platforms will provide a stronger and more successful business over time.”
Kim emphasised Bally’s experience in turning around struggling casino operations, saying:
“Our team has successfully improved more than 20 individual property acquisitions over 15 years in a variety of challenging circumstances, across the entire spectrum of gaming regulatory environments and market conditions.”
Bally’s also expressed interest in exploring a larger transaction, depending on Star’s financial needs.
“We would also be happy to explore alternative structures that would similarly preserve value for all key constituents, including regulators, creditors, equity holders and employees,” Kim stated.
What’s Next for Star?
It’s board is reviewing Bally’s proposal but has not committed to moving forward with it.
“The Board of The will review Bally’s proposal,” the company said in a statement. “However, there is no certainty that it will be progressed.”
The proposal adds another layer of complexity to it’s situation. The company must now decide whether to proceed with its existing restructuring plan or consider Bally’s offer, which could result in a shift in ownership and strategy.
Omkar Joshi, chief investment officer at Opal Capital Management, noted that Friday’s restructuring announcements did not guarantee Star’s survival.
“It does give them more time to get through their cashflow issues given the access to new liquidity, which is helpful.”
Joshi added that Bally’s bid introduces new possibilities.
“It’s good to see different options emerging which could then avoid a voluntary administration process. There’s still quite a lot of work that needs to be done by Star’s board and management in comparing the plans and seeing if this latest proposal from Bally potentially brings out others as well.”
Regulatory and Financial Challenges Remain
It’s financial difficulties stem from declining revenues, increased regulatory pressure, and fines for compliance failures.
In October 2022, the NSW Independent Casino Commission imposed a $100 million fine on Star for allowing money laundering at its Sydney casino. A separate investigation found the company had failed to prevent problem gambling.
The Queensland and NSW governments have so far refused to offer taxpayer support to Star, which employs around 9,000 people across both states.
Meanwhile, Bally’s has highlighted its financial strength as a key advantage in completing the deal.
“We have ample unrestricted liquidity to complete this transaction expeditiously,” Kim said, citing Bally’s cash reserves of US$171 million and a US$620 million credit facility.
Star’s Decision Could Shape the Casino Industry
If accepts Bally’s offer, it would mark a significant shift in Australia’s casino industry, bringing a major US gaming operator into the local market.
With Star’s future hanging in the balance, its next move will be crucial in determining whether it can survive the crisis and regain financial stability.
