Embattled casino operator Star Entertainment is grappling with a new financial setback as a crucial deal to divest its stake in a major Brisbane development teeters on the brink of collapse. The joint venture partners, Hong Kong investors Chow Tai Fook Enterprises and Far East Consortium, have threatened to withdraw from the agreement to purchase Star’s 50 percent stake in the Queen’s Wharf casino and hotel complex.
The partners, who each own 25 percent of the Brisbane complex, had initially agreed to buy Star’s share for $53 million, a move that would have allowed Star to assume full control of its Gold Coast project. However, the two firms have now issued a notice to terminate the deal, casting a shadow over Star’s financial future.
Financial Challenges and Recent Developments
Last week, Star shareholders approved a $300 million rescue package backed by US casino giant Bally’s and existing investor Bruce Mathieson. Despite this lifeline, the company continues to face long-term challenges. Star has managed to stave off administration for now, but its precarious position highlights the broader issues threatening the casino industry.
In a statement to the Australian Securities Exchange (ASX), Star acknowledged ongoing negotiations with its partners but admitted that no agreement had been reached on outstanding commercial issues. The termination notice will take effect next Monday unless retracted within five business days.
“Since the recent general meeting, the parties continued to negotiate with a view to finalising the long form documents but, as of this morning, have not reached an agreement on the outstanding commercial issues,” Star stated.
Implications of the Deal’s Collapse
Should the deal fall through, Star will be required to repay $10 million to its partners within 30 days. Failure to do so would necessitate the transfer of its one-third stake in the Gold Coast hotel project. Star Entertainment has yet to confirm the repayment details publicly.
Chow Tai Fook Enterprises and Far East Consortium co-own the Queen’s Wharf development with Star, and their withdrawal could leave Star burdened with significant financial obligations. Financial commentator Stephen Mayne suggested that the Hong Kong investors might be seeking last-minute concessions from the Queensland government before finalizing their bailout of the Queen’s Wharf project.
“[It’s] loaded with $650 million of its own debt, is still less than 50 percent operational and requires hundreds of millions of dollars in additional capital expenditure to complete,” Mayne noted.
Future Prospects and Challenges
The potential collapse of the Queen’s Wharf deal would force Star to shoulder the costs of completing the project, a scenario not anticipated when shareholders approved the Bally’s and Mathieson-backed capital injection. Mayne highlighted the precarious situation, noting that Star could once again face the prospect of bankruptcy.
“There is a lot of cliff-top poker going on here with Star Entertainment still a chance of going into administration,” he said.
Star also remains embroiled in legal challenges, with the financial crimes regulator AUSTRAC pursuing a $400 million penalty for alleged money laundering. This legal battle adds another layer of complexity to Star’s efforts to stabilize its financial standing.
Call for Government Intervention
From a shareholder perspective, Star has endured a “five-year pile on” from various government entities, resulting in substantial fines, increased taxes, license suspensions, and multiple inquiries. Mayne argues that it’s time for the Queensland, NSW, and federal governments to collaborate with Star and its joint venture partners to devise a comprehensive solution.
“It’s time all three governments sat down with the company and its Queen’s Wharf joint venture partners and thrashed out one over-arching deal that sorts out the mess and resolves who will own and run the Sydney, Brisbane and Gold Coast casinos over the longer term,” he said.
As Star Entertainment navigates these turbulent waters, the company’s future remains uncertain. The outcome of ongoing negotiations and legal proceedings will likely determine whether it can secure a stable financial footing or continue its struggle for survival.
