Casino operator Star Entertainment is mulling a bid from US gaming giant Bally’s, that would give it at least $250 million in funding, in exchange for a controlling stake in the group.
Star pulled back from the brink of collapse on Friday, reaching a deal with Hong Kong investors to sell out of Brisbane’s Queen’s Wharf and take full control of its Gold Coast casino precinct, in addition to bridging finance and a refinancing deal that would give it access to up to $940 million in debt.
On Monday morning, Star confirmed that it had received an unsolicited offer from US casino and gaming group, to raise at least $250 million in capital.
Bally’s described its offer as “an alternative path” to the Friday announcements by Star.
“In short, 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,” it said in a proposal letter lodged with the stock exchange.
It has proposed a $250 million capital raising, underwritten by Bally’s, in exchange for 50.1 per cent of Star’s shares.
The letter also said the US company remains “very open to discussing a larger transaction depending on our discussions with respect to Star’s liquidity and capital needs”.
On Friday, Star struck a deal with Hong Kong investors Far East Consortium International and Chow Tai Fook Enterprises to offload its 50 per cent stake in the Brisbane Queen’s Wharf casino development in exchange for $53 million.
Star shares have been suspended from trade on the Australian Securities Exchange for a week, after the company failed to submit its half-year accounts, as it warned it would be unable to stay afloat without a lifeline.’
Deals buy time for Star
In recent months, Star issued repeated warnings that its viability hung in the balance, leaving many expecting the group to enter voluntary administration if a deal wasn’t struck.
As its shares were suspended from trade, it said it would need to find a way to refinance all its existing corporate debt and inject enough cash to be able to lodge its financial results with the ASX.
Late Friday, it said it had secured a $250 million bridging finance facility from an alternative investment firm, King Street Capital Management.
Star said the bridging arrangement would provide liquidity to the company while it sought a long-term refinancing solution.
It also reached a refinancing proposal with an unspecified lender, that would allow it to refinance all of its existing debt, giving it a total debt capacity of up to $940 million.
Under a separate deal, Star’s stake in Queen’s Wharf in Brisbane would be bought out by its joint venture partners, in exchange for $53 million — meaning it was no longer on the hook for more than $200 million in future contributions to the development.
As part of the arrangement, Far East Consortium International and Chow Tai Fook Enterprises would sell back their stakes in hotel towers at The Star Gold Coast, taking Star from a third stake to full ownership.
Omkar Joshi, chief investment officer at Opal Capital Management, said the measures Star announced on Friday did not take a potential collapse off the table.
“It does give them more time to get through their cashflow issues given the access to new liquidity which is helpful.“
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Mr Joshi said it was hard to compare the arrangements with Bally’s approach, given there were not many details of the US gaming company’s proposal provided.
“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.”
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