Less than half a year after Star Entertainment tapped equity capital markets in a move to improve its financial state by the addition of AU$800 million, debt investors are circling the troubled Australian casino and gambling giant.
According to media reports, a number of credit entities are preparing financing packages to hit the casino business that has been recently having a hard time, following concerns that the aforementioned equity raising was not enough to help Star Entertainment fix its balance sheet. The Australian gambling company has been advised by Barrenjoey Capital.
At the end of December 2022, Star Entertainment had a gross debt worth AU$1.3 billion, including bank debt estimated at AU$685 million and AU$584 million in private placements in the US. The equity raising mentioned above reduced its net debt from AU$1.1 billion to AU$341 million, and the casino company has already unveiled a planned refinancing move.
According to Street Talk reports, this whole situation sounds like credit investors are getting ready to act quickly as possible in case a broader opportunity occurs, especially considering the series of unfortunate events that previously happened to Genesis Care. Market analysts believe that it would be interesting to see whether the troubled debt investment giant Oaktree Capital Management would end up playing an important part in the process in case a deal is successfully completed, even at risk.
Earlier in 2023, the company held some discussions with the Australian casino operator and, reportedly, negotiated potentially underwriting the equity raising.
Star Entertainment Faces Multiple Financial and Regulatory Troubles over the Last Few Years
As previously reported by Casino Guardian, Star Entertainment has lost a lot of its former glory. The Australian casino group’s stocks traded as high as AU$5.99 in its heyday, but following a series of unfortunate events that seriously hit the company’s finances and reputation, the stock last traded at AU$1.14 per share.
Over the past year, the casino and gambling company has been troubled by every misfortune that could happen to an entity operating in the gambling sector. Star Entertainment has been chased down by regulatory bodies for alleged violations of gambling, anti-money laundering and counter-terrorism financing laws, while taxes and leverage are constantly increasing. To make things worse, customers have been unwilling to spend the amounts they once used to, a trend that has only added to the serious financial pressure faced by the business.
Star Entertainment’s leverage has been subject to exponential growth during the Covid-19-related lockdowns from 1.8-times in the 2019 financial year to 5-times at the end of June 2022, based on earnings before interest, tax, depreciation and amortisation (EBITDA). The casino operator’s interest coverage ratio which measures the space for further movement in the company’s earnings, on the other hand, declined from 9.9-times to only 0.6-times.
In November 2022, Star Entertainment faced another bad news. At the time, the Australian Transaction Reports and Analysis Centre (AUSTRAC) filed money laundering cases against the operator’s Star Sydney and Star Queensland casinos in the Federal Court. The country’s financial regulatory body also had to write down Star Sydney’s value by more than AU$1 billion as the Government of New South Wales (NSW) raised taxes imposed on casino companies.
As mentioned above, in late February 2023, the CEO of the company, Robbie Cooke, ordered an AU$800-million equity raise to buy some time but eventually, Star Entertainment’s leverage has been diminished. Unfortunately for the company, discretionary spending has withdrawn significantly since then, and Star Entertainment is still facing four class actions and AUSTRAC penalties hanging like Damocles sword over its head.
- Author
Olivia Cole
