The directors of financially-troubled Australian casino operator The Star Entertainment Group Ltd say they “unanimously recommend” shareholders approve a AUD300-million (US$194.8-million) rescue package – referred to as “strategic investments” – from United States-based casino business Bally’s Corp, and Australian conglomerate Investment Holdings Pty Ltd.
That was in the “absence of a superior proposal,” and “in the absence of” an “independent expert changing its opinion”.
The information was given in a Monday filing to the Australian Securities Exchange, which included a lengthy report on the proposed transaction, supplied by investment consultant Grant Samuel & Associates Pty Ltd, described as an independent advisor.
Grant Samuel said non-associated shareholders of Star Entertainment would “clearly be better off if the transactions proceed than if they do not”.
The institution observed however that Bally’s had over US$3 billion in gross borrowings at the end of 2024, but only US$20 million maturing in each of the next three years, before over US$1.8 billion was scheduled to mature in 2028.
In most years, added Grant Samuel, Bally’s group earnings before interest, taxation, depreciation, and amortisation (EBITDA) had been “largely sufficient to satisfy ongoing capital expenditure obligations”.
“However, the anticipated step-up in investment with the development of Bally’s Chicago,” in Illinois, “and new entertainment resort at the former Tropicana site,” in Las Vegas, Nevada, “may absorb a greater share of its ongoing cash flows,” stated the report.
It added: “The sheer amount of debt it [Bally’s] carries raises a question as to whether it has sufficient financial firepower to participate in any significant follow on capital injections if that is required by The Star.”
Grant Samuel also noted that Bally’s had “no prior experience in the casino industry in Australia” and not much in large resorts with non-gaming components, despite having a “track record in successfully turning around struggling casino operations in the U.S.”
Star Entertainment, which runs its core properties The Star Sydney (pictured in a file photo), and The Star Brisbane, in respectively New South Wales and Queensland, will hold its general meeting in Sydney on June 25, where the rescue plan will be discussed.
On April 7 Star Entertainment announced it had entered into a binding term sheet with Bally’s for a multi-tranche convertible note and subordinated debt Instrument for a principal value of AUD300 million.
The following day, Star Entertainment said its largest shareholder, Investment Holdings, had entered into a binding commitment letter to subscribe for AUD100 million of the aggregate amount, on substantially the same terms as Bally’s.
Assuming that happens, Bally’s portion of the overall funding package would then be reduced to AUD200 million.
An initial AUD100-million tranche was received by Star Entertainment on April 9, split equally between Bally’s and Investment Holdings.
If the convertible notes issued to the two are converted, then their respective relevant interests in Star Entertainment’s shares will each exceed 20 percent, and when aggregated will exceed 50 percent, meaning shareholder agreement is required under Australia’s Corporations Act.
If Investment Holdings’ own shareholders do not nod that group’s input, Bally’s Corp could end up controlling 54 percent of Star Entertainment in its own right.
