Star sees one licence suspension extended, another deferred
Star Entertainment Group has announced that the suspension of its Sydney casino license will extend through September 30, 2023, alongside a delay in the suspension of its Gold Coast license. This decision comes as the company navigates a turbulent financial landscape in its quest for stability.
According to an ASX filing, the NSW Independent Casino Commission (NICC) has informed Star that the suspension of its Star Sydney license will be prolonged beyond its original expiry of March 31, 2023. This includes the retention of state-appointed independent manager Nicholas Weeks.
Star Sydney has been under scrutiny following two suitability inquiries in the past three years, both returning findings that deemed the casino unsuitable for licensing. The most recent inquiry concluded in October 2022, resulting in a continued license suspension, attributed to failures in addressing deficiencies identified during previous investigations and a detrimental company culture.
Despite prior speculation that the NICC might revoke Star Sydney’s license entirely, the appointment of CEO Steve McCann in June 2022 has influenced regulators’ decision to extend the suspension rather than impose a more severe penalty. The NICC has recognized some improvements in Star’s remediation efforts, albeit accompanied by caution due to the company’s precarious financial status.
Financial Challenges and Strategic Responses
Since taking the helm, CEO McCann has overseen a stabilization of remediation efforts; however, serious financial challenges continue to plague the company. In January 2023, Star reported significant cash flow issues, prompting asset divestitures and the pursuit of a substantial refinancing package valued at A$940 million (£456.9 million/€261.5 million) in collaboration with Salter Brothers Capital.
The NICC’s Chief Commissioner, Mr. Philip Crawford, noted in a statement that while there has been progress in remediation, uncertainties surrounding Star’s financial condition hindered timely advancements. To that end, the continued suspension of the casino’s license serves as both a cautionary measure and an opportunity for the company to improve its standing.
McCann acknowledged the NICC’s appraisal of their remediation progress, emphasizing Star’s commitment to fulfilling obligations under the remediation plan and establishing a pathway to return to a position of suitability.
Gold Coast License Suspension Postponed
In a parallel development, the NICC’s decision to defer a planned 90-day suspension of Star’s Gold Coast license has also been extended to September 30, 2023. Weeks will likewise continue his oversight at this property, which has been under investigation since 2022. The Gold Coast venue was deemed unsuitable for licensure in October of that year, leading to imposed fines and management adjustments, including the current license suspension.
The Queensland government, reflecting similar reasoning as the NICC, indicated its approval for this latest postponement based on the progress reported by Weeks. They acknowledged the challenges Star’s management faced in implementing necessary remediation measures within the established timeframe.
Navigating Uncertainty: Options and Opportunities Ahead
With both license extensions in place, Star Entertainment Group is afforded additional time to assess its resource allocation and restructure its business model toward a more focused and efficient operation.
On March 7, Star announced the divestment of its 50% stake in the multi-billion-dollar Queen’s Wharf development in Brisbane for A$53 million. Sold to existing partners Chow Tai Fook and Far East Consortium, the decision to exit this expensive venture allows Star to alleviate financial burdens, eliminating its share of associated debts. Consequently, the company has reinforced its commitment to enhancing its offerings in the Gold Coast region.
In a further strategic move, U.S.-based Bally’s Corporation has expressed interest in acquiring Star, submitting a takeover proposition of A$250 million for a 50.1% stake. Bally’s has actively engaged with Star officials in Australia and is advocating for a comprehensive deal that preserves Star’s collective assets while rejecting the Queen’s Wharf strategy.
As these developments unfold, the trajectory of Star Entertainment Group remains uncertain. However, the potential for strategic realignment and operational enhancement offers a ray of hope for recovery and revitalization in a competitively evolving industry.
