Star Wins Queen’s Wharf Reprieve But Investors Eye Rivals
Star Entertainment Group (ASX: SGR) has secured a last-minute deal with its Hong Kong joint venture partners to prolong the deadline for its essential exit from the Queen’s Wharf Brisbane initiative.
In a statement issued Monday through the ASX, Star announced that partners Chow Tai Fook Enterprises (CTFE) and Far East Consortium (FEC) had consented to prolong the termination date of their March 2025 heads of agreement to July 31, 2025.
The submission occurred a week following the announcement by the Hong Kong-based investors indicating their readiness to abandon the deal. Even with the respite, the Australian Financial Review stated Monday that investors are thinking about “abandoning” Star in favor of competing casino companies, such as New Zealand's SkyCity Entertainment and the US-based hospitality and gaming powerhouse Delaware North.
Transaction in Jeopardy
In March, CTFE and FEC agreed to purchase Star's 50% interest in the AU$3.6 billion (US$2.4 billion) project, which many analysts referred to as a fire-sale price.
The agreement is viewed as a saving grace for Star, which has struggled with a severe financial crisis during the last two years. This would allow the company to eliminate a AU$1.4 billion (US$900 million) debt responsibility and obtain a monthly AU$5 million (US$4 million) management fee for overseeing the Brisbane casino, while redirecting resources to its other main assets.
Star has suffered significant losses and witnessed a steep drop in market value due to investigations in various jurisdictions regarding anti-money laundering (AML) violations and shortcomings in corporate governance.
At its nadir, in late February, the casino operator was reportedly holding only AU$79 million (US$52 million) in cash, barely sufficient to keep operations running for another week.
A capital infusion of AU$300 million (US$195 million) from the US gaming company Bally’s Corporation (NYSE: BALY.T) and the Mathieson family, the firm's largest current investor, seems to have prevented insolvency. The agreement will allow the US-based operator to gain majority control of the company, subject to finalizing the investment terms.
Bally’s Anxieties?
However, Bally’s recently stated that it is unwilling to relinquish control of the Queen’s Wharf. In an interview with Asian Gaming Brief on Friday, Bally’s chairman Soo Kim cautioned that his company might withdraw from the rescue agreement if Australia’s financial regulator, AUSTRAC, prevails.
In November 2022, the agency initiated civil action against Star for purported violations of laws concerning anti-money laundering (AML) and counter-terrorism financing. AUSTRAC seeks a federal court to levy a AU$400 million (US$260 million) penalty on the troubled casino operator.
Star has cautioned that a fine of AU$100 million could threaten its viability to operate as a going concern.
“One of the conditions precedent to our making the final investment and converting is that the company is solvent,” Kim said.
