Australian operator Star Entertainment halted trading on February 22 after announcing that it is in talks with U.S.-based investment firm Oaktree Capital Management to raise substantial capital–-approximately US$545 million to be exact—to help supplement some of the $850-plus million in losses it incurred during the second half of 2022.
According to Star, the agreement would encompass “an AU$685 million ($466 million) 3-for-5 pro rata accelerated non-renounceable entitlement offer and a AU$115 million ($78.34 million) institutional placement.”
The announcement comes just days after the company released dire projections for both its flagship Star Sydney property and the company as a whole, which caused the operator’s share price to plummet to all-time lows.
Due to proposed casino tax increases in New South Wales (NSW) and the extensive list of fines and penalties that Star has amassed in suitability inquiries, the company said that it could lose over $1 billion off of its balance sheet moving forward.
This new capital infusion from Oaktree, however, would be used to increase liquidity and pay off some of the more pressing debts.
Despite all of the bad news that Star has endured over the past two-plus years, the company reported $690.11 million in revenues for the second half of 2022, which is a year-over-year increase of over 75 percent. EBITDA rose by 579 percent, up to $136.18 million.
Star CEO Robbie Cooke said at the time, “We have been pleased with the ongoing strength of trading across our Queensland-based properties while trading at The Star Sydney has been impacted by operational changes associated with the outcome of the Bell Review and increased competition. Our focus has been and remains on working constructively with our regulators and the NSW Manager and Queensland Special Manager to urgently remediate our businesses as we seek to return to suitability”.
It should be noted that the company also recorded $861 million in losses, a year-over-year increase of 1,063 percent.
The NSW tax hikes, which would see the rates for table game and poker machine winnings almost double, are perhaps the most concerning to Star, given their permanence as well as the company’s dependence on the performance of Star Sydney.
When reporting its results, Star said that it would “continue discussions” with state officials, but asserted that “unless the NSW Government and The Star reach agreement […] the changes as currently proposed are likely to have a significant impact on The Star’s earnings and operations.”
Additionally, the company is facing potential punishment from AUSTRAC, the country’s federal financial crime watchdog, over violations of anti-money laundering and counter-terrorism funding (AML/CTF) regulations.
In a statement to Asia Gaming Brief, AUSTRAC said that it “has made orders and set down timelines for next steps in […] the matters, which AUSTRAC will comply with,” and noted that “it takes time to narrow the issues in dispute.”
