Star Entertainment Salvages Loan Amid Annual Results Gloom

September 26, 2024
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A day after securing a crucial maximum A$200m ($137m) debt facility, struggling Australian casino operator The Star Entertainment Group has reported a statutory net loss of almost A$1.7bn for annual results ending June 30.
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A day after securing a crucial maximum A$200m ($137m) debt facility, struggling Australian casino operator The Star Entertainment Group has reported a statutory net loss of almost A$1.7bn for annual results ending June 30.

Star Entertainment late Wednesday (September 25) announced a new debt facility agreement that takes some pressure off the company’s financial woes, but annual metrics released on Thursday are grim reading ahead of a likely massive fine from financial transactions regulator AUSTRAC.

The company’s ability to operate its Sydney casino in New South Wales (NSW) state is also under threat as the NSW Independent Casino Commission (NICC) considers the damaging report of the second Bell Inquiry into Star’s suitability.

Star’s revenue for financial year 2023-2024 fell 10 percent to A$1.68bn, with EBITDA dropping 45 percent to $175m, the company said in a filing to the Australian Securities Exchange.

But the ongoing drag of A$1.1bn in operating expenses and A$1.7bn in significant items kept statutory net loss deep in the red, although this year’s figure of negative A$1.69bn was 31 percent up on last financial year’s negative A$2.44bn.

Star attributed opex volume to “increased spending” on remediation and transformation activity compelled by the NICC and the first Bell Inquiry into the company’s misconduct.

Significant items, meanwhile, were dominated by a A$1.44bn impairment across all properties, led by an A$819m impairment in Brisbane, including all equity directed to Star’s newly opened Queen’s Wharf integrated resort in the Queensland state capital.

“The Star faces significant near-term liquidity requirements, including the funding of the Group’s operations at current trading levels, ongoing remediation and transformation activities, further equity contributions to the [Queen’s Wharf consortium] and anticipated outflows associated with ongoing regulatory matters,” the company said in a statement.

The last of these requirements refers to a likely massive fine from AUSTRAC, whose two-year probe into Star could slug the company with a half-billion Australian dollar fine or more, given AUSTRAC's A$450m fine for rival casino operator Crown Resorts over similar legal breaches.

Star’s performance has barely improved since the end of the financial year amid “challenging” trading conditions and loss of market share, with EBITDA losses of A$6.6m and A$1.1m for July and August, respectively.

The company also reported a 10.7 percent decrease in daily average revenue after the introduction of mandatory cashless gambling in parts of its Sydney casino and A$5,000 daily cash limits.

Additional regulatory tightening, in the form of cashless play across the entire casino in Sydney from this October 19 and cash limits of A$1,000 from August 19, 2025, are likely to further erode earnings, but Star was “unable” to quantify the impact of these changes or similar changes pending in Queensland.

The maximum A$200m debt facility, which includes two covenant waivers for September and December, was secured on Wednesday after months of talks with financial institutions, shareholders and the NSW government.

But even this respite carries risk, with the two tranches of A$100m subject to stricter-than-normal conditions given Star’s circumstances, such as the retention of regulatory and government approvals, lender consensus approval for Star management strategic and financial planning, and the raising of “additional subordinated capital of at least A$150m”.

Star’s financial position, disastrous optics and growing list of purged directors and executives mark the company as the most precariously placed operator in Australia’s current era of regulatory and public backlash against the gambling industry.

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