Star Entertainment restructures debt, raises $750m at large discount
Star Entertainment, the embattled operator of casinos in Sydney, Brisbane and the Gold Coast, is raising $750 million at a significant discount but says it will not proceed with the sale of any of its assets.
The company has also secured $450 million in new debt facilities from Barclays and Westpac as part of a refinancing process. Star’s chief executive, Robbie Cooke, said it was a “key milestone” in the company’s renewal.
The Australian Financial Review’s Street Talk column first flagged the deal on Sunday. It followed an extensive strategic review undertaken by Barrenjoey Capital Partners after Star was buffeted by intense regulatory scrutiny and hundreds of millions of dollars in penalties for breaching anti-money laundering and counterterrorism financing laws.
Star Entertainment shares have fallen almost 70 per cent in 12 months. Oscar Colman
A fine levied by financial crimes watchdog AUSTRAC, four class actions and two revoked state casino licences weighed on the embattled casino operator in the last financial year, culminating in a $2.2 billion non-cash impairment of The Star Sydney, The Star Gold Coast and Treasury Brisbane.
That was despite revenues climbing 22 per cent to $1.9 billion compared with the previous period, which was affected the previous year by COVID-19 restrictions. Statutory earnings before interest, tax, depreciation and amortisation excluding any significant items was slightly above previously announced guidance at $317 million for the year ending June 30.
In a statement on Monday, the company said it had “undertaken an extensive process and evaluated a range of funding and asset sale alternatives (including property monetisation, equity, equity-linked financing, subordinated debt and larger non-bank lender packages).”
Under the arrangement, the company will have no debt maturities until the second half of 2027 and will retain its casino operations. It will raise $589 million through a 1-for-1.65 pro rata offer of new shares at 60¢ and a $161 million institutional placement. Shares last traded at 75¢, although they were halted on Monday following the report in the Financial Review.
Star shares have fallen almost 70 per cent in the past 12 months.
“With an optimised capital structure, strengthened balance sheet and enhanced flexibility, we have a strong platform from which to deliver on our renewal program and strategic priorities,” Mr Cooke said.
In a trading update, the company said monthly domestic revenues were $143.5 million in July and August. Earnings were $21 million on average.
“Remediation costs [this financial year] are expected to be $35 million to $45 million,” the company said. “The previously foreshadowed 50 per cent reduction in remediation costs is not expected to occur until [2026].”
The capital raise and new loan facilities will eliminate Star’s hefty debt load and help fund costs associated with Queen’s Wharf in Brisbane, one of Star’s two big development projects under way. Star has estimated Queen’s Wharf’s project costs would be $2.9 billion. It has been in a dispute with the builder, Multiplex, which has delayed construction.
Introducing your Newsfeed
Follow the topics, people and companies that matter to you.
Find out moreRead More
Latest In Gaming & wagering
Fetching latest articles