Star Entertainment Shares Rally in Australia Following Building Sale Confirmation

October 3, 2024 Australia Casino & Hotel

Shares of Australia’s Star Entertainment Group saw a significant increase, rising 18% to AUD$0.30 (€0.19) per share last September 27, 2024. This rally comes after the company confirmed the successful sale of its former Brisbane casino building, Treasury Brisbane Casino, for AUD$60.5 million (USD$41.5 million). The sale represents a crucial move for the operator, which has been grappling with serious financial challenges and a compliance scandal that has marred its reputation.

The announcement marks a pivotal moment for Star as it seeks to stabilize its finances amid a tumultuous period. Last week, the company reported a staggering AUD$1.69 billion net loss for the fiscal year 2024, leading to a sharp decline in its share price. Just prior to this financial disclosure, shares had been trading around AUD$0.50, meaning they are still 40% below that level despite the recent surge.

Star’s troubles stem from a series of investigations and reports that have questioned its suitability to operate casinos in New South Wales (NSW). Following the release of the second Bell report in August, which highlighted significant governance and cultural issues, the NSW Casino Commission (NICC) issued Show Cause notices to Star. These notices require the company to explain why it should not face disciplinary action for its shortcomings. NICC chief commissioner Philip Crawford emphasized the report’s findings, stating that the company had failed to adequately address concerns raised in the first Bell report.

In response to the ongoing scrutiny, Star has taken steps to demonstrate its commitment to rectifying its issues. Alongside its Show Cause response, the company submitted additional information to the NICC. This includes details regarding The Star Sydney’s suitability for holding a casino license, the progress of its remediation plan, and the current financial situation of the company. Star aims to reassure regulators and investors alike that it is taking necessary actions to recover from its troubled state.

The casino operator’s liquidity challenges have led it to negotiate further financial support from creditors. Last week, Star secured an additional AUD$200 million in debt, structured in two A$100 million tranches. This agreement, however, comes with stringent conditions, including the requirement for the company to provide approved financial forecasts to its lenders. These measures are critical as Star works to restore investor confidence.

Additionally, the company was in talks with the Queensland Government for tax relief, which could have provided much-needed financial breathing room. However, these negotiations fell apart when Star could not agree to cancel executive bonus packages.