Embattled casino Star Entertainment Group swung to an operating loss in the third quarter. The loss is being attributed to declining foot traffic, ex-Tropical Cyclone Alfred and tighter gambling regulations. For the quarter, Star has reported a loss in earnings before interest, taxes, depreciation and amortisation (EBITDA) of A$21 million (about $13.6 million).
The of A$271 million for the third quarter—a drop of 9 percent from the December quarter, and a 35 percent drop year-on-year. Sydney’s flagship venue has seen a 17 percent drop in daily revenue compared to its four-week average before 19 August 2024. Revenue at the venue fell 8 percent quarter-on-quarter, with cash limits dropping further from A$5000 to A$1000 in August.
The company has revealed that Cyclone Alfred has severely affected operations at Star’s Gold Coast and Brisbane venues, contributing to millions in lost revenue. The Brisbane location was not spared either, with temporary closures due to the cyclone led to a A$1 million EBITDA loss.
Bally’s offer for Star
Earlier this month, Star agreed to take lifeline from US casino group Bally’s Corporation. However, the company has still warned of “material uncertainty” regarding its ability to continue as a going concern. This highlights that several critical initiatives needed to improve its liquidity position. The agreement would see Bally’s take control of the operator as part of a A$250 million deal.
In addition, Star’s largest individual shareholder, Bruce Mathieson, while backing the Bally’s deal had pledged to invest an additional A$50 million in the company if the deal goes through. Apart from the deal, Mathieson, a well-known figure in Australia’s pub and gaming industry, holds about 10 percent stake in Star. Local reports said he could raise his stake in Star and take a seat as a board member should the deal progress.
In early March, Star received an unsolicited bid from Bally’s offering to inject the capital in exchange for a 50.1 percent stake in the company. Under the deal, Bally’s said it was willing to convert its offer into subordinated convertible notes. These notes would eventually convert into a 50.1 percent majority stake in Star. Bally’s recapitalisation package is fully funded, not subject to approval and as stated by the company’s Chairman Soo Kim, is “very open” to discussing a larger transaction.
This deal became a top priority for Star Entertainment after a failed attempt to refinance nearly A$1 billion in debt. Star had announced that it was exploring a lifeline from Bally’s after it had “not received a binding debt commitment letter” from Salter Brothers Capital, leading to the withdrawal of its A$940 million refinancing proposal. Without the refinancing, Star was on the verge of serious financial distress.
