The Star Entertainment Group’s future outlook has taken another turn as its plans to exit the Destination Brisbane Consortium (DBC) look to be under threat.
The Australian casino operator confirmed that its joint venture partners in the DBC, Chow Tai Fook Enterprises and Far East Consortium International Limited, have issued a written notice to terminate the binding heads of agreement (HoA) that was signed in March.
In a note to the ASX, The Star confirmed that the notice of termination will be effective on 7 July, unless withdrawn earlier. Despite this, The Star reiterated that it is still willing to negotiate with its joint venture partners.
The HOA was subject to the execution of long-form agreements and the fulfillment of long-form agreements and the fulfilment of certain conditions. An initial deadline of 30 April was set, but that date passed without an agreement being found.
Due to this, each party became entitled to terminate the HOA by providing five business days’ written notice, as has now been done.
The Star planned to divest its 50% stake in the DBC in a bid to consolidate its position on the Gold Coast for a fee of AUD $53m (£38.5m).
If an agreement had been reached, The Star would no longer be required to make equity contributions, set to be $212m, on a substantial debt obligation of $1.4bn. It would also have acquired two hotels from its joint venture partners at The Star Gold Coast.
Bally’s investment boost
Although a setback for The Star, which has been battling significant financial challenges due to what it describes as a “challenging operating environment”, the company received a financial boost following stakeholder approval of aggregate funding of $300m from Bally’s Corporation and Investment Holdings.
The Star confirmed that it has received $133m from the pair since approval. It has also received $58m of Event Centre sale proceeds, following satisfaction of the condition to the release of those proceeds from escrow.
Anne Ward, The Star’s Chair, told shareholders that funding from Bally’s and Investment Holdings will “provide cash funding and assist The Star’s ability to continue as a going concern”.
News of the termination represents a significant blow for The Star’s revamped executive team. However, the funding from Bally’s allows the company to address its ongoing challenges and seek a more positive future.
