Star back on the brink as Brisbane casino deal collapses

Embattled casino operator Star Entertainment has confirmed that the deal to offload its troubled Queen’s Wharf casino in Brisbane to its Asian partners has collapsed, leaving the group exposed to a loss-making asset and further investment in the operation.

Star shares dropped 16.3 per cent to a record low of 9.2¢ after the company confirmed on Friday that the deadline to renegotiate the sale of its 50 per cent stake in Queen’s Wharf to Chow Tai Fook Enterprises and Far East Consortium had passed with no progress from the parties.

“As of this morning, the parties have been unable to reach an agreement on a number of outstanding commercial issues, which in turn prevent the finalisation of long form documents,” Star said in a statement to the ASX.

Star offered a glimmer of hope when it indicated that negotiations were continuing even though its joint venture partners had declined to extend the deal deadline to next week.

“The Star is continuing to engage with the joint venture partners and will provide an update if there are any material developments regarding the parties’ respective interests,” it said.

Star will have to repay more than $36 million to its consortium partners between now and September, but the bigger issue is how it will shoulder its share of future equity contributions and the consortium’s debt.

Star said Destination Brisbane Consortium (DBC), in which it continues to hold a 50 per cent equity stake, has a debt exposure of $1.4 billion. It now also remains exposed to $200 million of future equity contributions to DBC due to massive cost overruns at the $3.6 billion resort.

The casino operator said it may face equity contributions above this level if required as part of refinancing commitments when the current loan expires on December 31, 2025.

Star’s cash levels have been bolstered to $234 million by recent asset sales as well as equity injections from US group Bally’s and interests associated with major shareholder Bruce Mathieson.

Star is also awaiting the outcome of a court decision on fines for breaches of anti-money-laundering regulations that are expected to reach to hundreds of millions of dollars. Star’s lawyers told the Federal Court last month that a fine of more than $100 million could trigger the group’s financial collapse.

When Star announced the Brisbane deal in March, it helped the casino operator to avoid financial collapse, with the consortium partners offering to pay $53 million for Star’s 50 per cent share and hand over their interest in properties surrounding Star’s Gold Coast resort.

Earlier this week, Star published its quarterly report, which precedes audited financial accounts due next month. The published report states that it made a loss before interest, tax, depreciation and amortisation costs of $27 million for the quarter to June 30, on revenue of $270 million.

The casino operator said that mandatory carded play at its flagship Sydney casino, which requires all patrons to have a physical card – either The Star Club membership or a Player Card – plus $5000 cash limits had continued to drag down its gambling performance, with average daily revenue down 17 per cent since that was introduced in August last year.

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