Star in peril as partners threaten casino deal

Star Entertainment’s task of staying solvent just got a lot trickier after its equity partners in Brisbane’s Queen’s Wharf casino threatened to walk away from a deal to buy out Star’s interest in the business.

Star announced on Monday that Chow Tai Fook Enterprises and Far East Consortium have given it five days’ notice to terminate the heads of agreement that would have transferred ownership of the Brisbane business to them for $50 million and hand Star ownership of properties at the Gold Coast casino.

A rescue deal from Bally’s Corporation chairman Soo Kim is keeping Star afloat for now.Credit: Dominic Lorrimer

“Despite the receipt of this notice, The Star remains willing to continue negotiations with the joint venture partners to give effect to the [transaction],” Star said.

Last week, Star shareholders approved a $300 million rescue deal from US suitor Bally’s and pokies billionaire Bruce Mathieson, who will tip in $100 million as part of the rescue.

Earlier, Star’s lawyers told a Federal Court hearing that it might not survive a penalty for money laundering failures if financial crime watchdog AUSTRAC succeeds with a proposed $400 million penalty. Star said there was no certainty it could fund a $100 million fine, which it said was more appropriate.

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The court has yet to hand down its decision.

Star has been embroiled in a spiralling financial crisis since last year as gambling revenue fell and regulatory costs mounted following a run of scandals – including revelations it facilitated money laundering and allowed organised crime to operate on its premises – which led to the loss of all three casino licences.

Star announcement of the Brisbane deal in March, helped the casino operator avoid financial collapse. The consortium partners offered to pay $53 million for Star’s 50 per cent share. Star was also to receive $5 million a month to run the casino, rising to $6 million a month as of next year.

Billionaire Bruce Mathieson will tip in $100 million as part of the rescue.Credit: Arsineh Houspian

The deal would also relieve Star of financial commitments to invest more money into the Brisbane business and all debts related to the project.

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According to a statement from Far East at the time of the deal being announced, it will receive an $18 million break fee from Star if the deal fails.

Star on Monday said it would provide an update when there were further material developments regarding its negotiations with its joint venture partners, including any termination of the agreement, which would take effect next Monday.

Star also said it had received the $58 million in proceeds from the sale of its Event Centre business in Sydney and $133 million in funding from Bally’s rescue deal.

The casino operator is due to report its full-year earnings in August. It is expected to reveal that it is continuing to burn cash due to falling revenue from its lucrative poker machines due to the restrictions on cash gambling and the dearth of high-roller gamblers.

Star shares were trading slightly lower at 14¢ on Monday afternoon.

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