Fresh Take: Star Entertainment Scores $180 Million Lifeline from Bally's Corporation
Stockholders of Star Corporation to Decide on $180 Million Aid Package Proposed for Bally's Corporation
In a bid to steer clear of impending financial turbulence, Star Entertainment Group accepts a rescue package worth AU$300 million (roughly $180-182 million) from Bally's Corporation. This move comes after negotiations for a larger refinancing plan fell through, with no other potential bidders on the horizon.
Bally's Corporation, a US-based casino powerhouse, had expressed interest in teaming up with Star Entertainment earlier this year. On March 10, Bally's made its offer official, and Star confirmed it via an ASX filing on Monday, April 4.
Initially, the deal involves a AU$100 million capital infusion from Bally's, payable by April 9-10. This cash influx doesn’t necessitate Star’s shareholder acceptance, as they exchange 15% of their shares and AU$66.6 million in subordinated non-convertible debt to Bally's in return.
If shareholder and regulatory approvals are secured, Star could receive an additional AU$200 million by October 7. This amount may be split into two payments of AU$100 million each, depending on any delays in final approvals.
In the event that all conditions are met, Bally's could potentially end up controlling as much as 56.7% of Star’s shares—a significantly larger stake than initially offered. The linked notes attached to the deal come with an 9% interest rate and mature in July 2029. Bally's will procure shares at just 8 cents apiece, despite the fact that Star's pre-suspension trading price was 11 cents.
Trading of Star’s shares has been halted for over a month due to delays in financial reporting. Amid this challenge, Star intends to call a shareholder meeting in June to discuss and vote on the proposed deal. Soo Kim, chairman of Bally's, states that the deal offers a means to help Star bounce back.
"This transaction provides Bally's the opportunity to infuse The Star with what it needs to regain its position as Australia's preeminent gaming destination," Kim said. "And it allows The Star shareholders to share in what we confidently believe will be a brighter future together."
George Papanier, Bally's president, expresses excitement about the company's entry into the Australian market. "We're excited to bring our reputation and operating expertise" to support Star's recovery.
There's a possibility for Bruce Mathieson, Star's largest individual shareholder, to contribute AU$100 million to the deal. Should this contribution materialize, Bally's would reduce its investment down to AU$200 million, giving Star a much-needed financial cushion. If Mathieson comes through with the investment, both he and Kim will assume observer roles on the board as part of the agreement.
This lifeline could prevent Star Entertainment from collapsing amid regulatory scrutiny and high fines for alleged breaches of anti-money laundering regulations in New South Wales and Queensland. Bally's intends to retain Star's integrated operations rather than dismantle them, paving the way for a resurgence in Australia's gaming industry.
- Bally's Corporation, a US-based casino powerhouse, is expected to control as much as 56.7% of Star Entertainment's shares, should the proposed deal go through.
- In addition to the initial AU$100 million capital infusion, Star could receive an additional AU$200 million by October 7, if shareholder and regulatory approvals are secured.
- If Bruce Mathieson, Star's largest individual shareholder, contributes AU$100 million to the deal, Bally's would reduce its investment down to AU$200 million, providing Star Entertainment with a much-needed financial cushion.
- The linked notes attached to the deal will mature in July 2029, with an 9% interest rate, making it a crucial aspect of the overall refinancing plan for Star Entertainment's business in the upcoming years.
