The Star Entertainment Group (The Star) announced on Friday that it will sell its 50% stake in The Star Grand Brisbane, pending regulatory approval and other conditions. According to Casino.org, the buyers are Chow Tai Fook Enterprises and Far East Consortium, the company's two largest shareholders.
The Brisbane sale
The stake is being sold for A$53 million. Casino.org says that is A$3 million more than the figure it reported the previous day. The Brisbane resort, which the report says opened only last August, is described as a A$1.6 billion complex on the Brisbane River.
The Star said the two buyers delivered A$35 million on Friday to provide near-term liquidity. Under the sale, The Star will no longer be required to make further equity contributions to pay down debt from the Brisbane construction. Casino.org reports that lenders are still owed A$1.4 billion. The source does not explain how that debt will be shared after the sale.
Bridge loan and refinancing
The Star also announced a A$250 million senior secured bridge loan from New York-based King Street Capital Management. The loan carries an annual all-in interest rate of 15%, paid monthly. Up to 10% of that can be paid in kind, meaning it need not be settled in cash.
Casino.org said reports had suggested The Star could run out of cash as soon as this weekend. It also said it had reported a A$200 million loan offer from coal magnate Chris Wallin, but that offer never materialised.
The company further said it had received a proposal from another potential lender to refinance A$750 million of debt. The lender was not named. The Star said outstanding due diligence inquiries are expected to be completed by 18 March. Whether the proposal will be accepted has not been decided.
Management's comments and the regulatory backdrop
Chief executive and managing director Steve McCann described the deals as a step towards stability, while acknowledging the risks that remain.
"This transaction is an important milestone for the company and contributes to providing a potential pathway towards financial viability," said Steve McCann, CEO and managing director of The Star Entertainment Group.
McCann said the company "still faces various risks" and that its immediate focus will continue to be its implementation plan "to restore our licenses". He also said the company intends to seek a whole-of-company refinancing. He pointed to its Gold Coast operations, where it expects almost 1,200 hotel rooms after the five-star Andaz Hotel opens in late 2025. He said full ownership of those hotels could improve the performance of the business.
Casino.org attributes The Star's difficulties to government inquiries in Queensland, where it operates The Star Gold Coast and the Brisbane property, and in New South Wales, where The Star Sydney is located. According to the report, those inquiries found that The Star, like rival Crown Resorts, failed to protect its casinos from being used by criminal syndicates to launder money. The report adds that The Star was also accused of welcoming gamblers from China and allowing players banned in one Australian state to gamble at one of its casinos in another.
The source does not say when the Brisbane sale is expected to complete. It also does not name the regulators whose approval is needed, or say what conditions apply to the deal or the loan.