Star Entertainment's Brisbane casino sale to Hong Kong partners fails
The listed company must also make a $41m payout to the two Asian groups — Chow Tai Fook and Far East Consortium — by early September amid signs their relationship had soured as Star sought out rival groups, including the Blackstone-owned Crown Resorts, to run the casino.
Star on Friday flagged it could undertake a series of asset sales as it scrambles to fund both that payment and deal with a refinancing of the Destination Brisbane Consortium vehicle which controls the Queen's Wharf project.
In the wake of the shock termination, Star noted that talks were continuing with the deep-pocketed pair of Asian investors. However, it said that it was also considering what alternative options may be available in relation to its 50 per cent interest in DBC, along with the Treasury Brisbane hotel and car park and its 50 per cent interest in the Charlotte Street car park.
The Treasury Brisbane hotel was quietly marketed last year and came close to selling to a Thai group ahead of the larger proposal by Chow Tai Fook and the Far East Consortium emerging. Another group, Warren Ebert's Sentinel operation, looked at buying the car park that Star fully controls, industry sources said.
Each of the sales could have raised about $45m at the time, according to people familiar with the assets. But they may not trade so favourably now given Star's diminished state. Star shares dropped by 1.8c to a record low of 9.2c.
Chow Tai Fook and Far East Consortium, which currently each hold 25 per cent of Queen's Wharf, had agreed in March to take over Star's 50 per cent share, but negotiations faltered and hit crisis point last month with formal termination action.
In its quarterly activities report, released Wednesday morning, Star warned the deal's failure would mean it had a week to repay $10m of the $45m it had already received from its partners and reimburse another $26.5m by September 5.
It was hopeful of negotiating 'long form documents' but its efforts to gain a further extension until August 6 from the Hong Kong pair were brushed aside.
As a result of the deal's failure, the listed company will end up keeping its one-third interest in its Gold Coast assets, as well as the Treasury hotel and car park, and its 50 per cent interest in a Charlotte Street car park.
But, Star must repay $10m to its HK partners by August 6 and also reimburse them for their share of equity contributions to the Brisbane assets since the end of March. This amounts to $31m and is payable by September 5.
To the extent this is not repaid, Star must transfer its one third interest in a hotel on the Gold Coast to the HK groups. They are also required to reimburse Star but only to the tune of about $1m for its contributions on the Gold Coast project.
Star faces larger problems over the parent guarantee in relation to its 50 per cent share of the Destination Brisbane Consortium debt facility, for which the total current drawn balance is about $1.4bn. That will now remain on foot due to the deal's failure.
Star will also continue to be responsible for its share of future equity contributions to DBC, estimated to be approximately $200m. More equity may also be required as part of the refinancing of the DBC debt facility, which is due to expire in December 2025.
Listed investors, however, are wary of pouring further funds into the company after two huge discounted equity raisings, and a potential $300m rescue deal by US-based casino operator Bally's is under regulatory scrutiny.
Star Entertainment shareholders in June had overwhelmingly approved the $300m rescue deal after being warned they would get nothing if the company collapsed into liquidation. Chair Anne Ward told a shareholder meeting to approve the transaction as the beleaguered company had 'exhausted all options' to secure funding for its survival and the Bally's deal was the only offer on the table.
While the white knight may now review its strategy, that deal could still see Bally's and pubs billionaire Bruce Mathieson's Investment Holdings take a majority stake in the casino company.
Star said it was continuing to engage with its HK joint venture partners and will provide an update if there are any material developments regarding their respective interests in DBC and Destination Gold Coast Consortium. Ben Wilmot Commercial Property Editor
Ben Wilmot has been The Australian's commercial property editor since 2013. He was previously a property journalist with the Australian Financial Review. Companies
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