Australian casino operator The Star is in talks to raise some $545 million after registering a $861 million loss in the half-year ended December 31st. The company halted trading on Wednesday as it’s reportedly in talks with Oaktree Capital Management for the new funding.
This comes after a warning earlier this month that it was anticipating losses of up to $1.11 billion due to legal cases against the company for alleged anti-money laundering malpractice and potential changes to the New South Wales tax regime.
The announcement caused a massive drop in share value.
According to the company’s Wednesday announcement, the trading halt is expected to remain in place until Friday ‘or when the announcement is released to the market’.
As part of the group’s results announcement on Thursday, The Star alluded to the Oaktree discussions, noting that it was conducting equity raising of AU$800 million ($545 million), ‘comprising of a AU$685 million ($466 million) 3-for-5 pro rata accelerated non-reounceable entitlement offer and a AU$115 million ($78.34 million) institutional placement’.
The results of the equity will be used to repay debt and increase liquidity.
The trading halt comes just a day before The Star announced its half-year results (ended December 31st), recording a 75.6 percent yearly increase in revenue, to AU$1.01 billion ($690.11 million).
However, the group registered a net loss of AU$1.26 billion ($861 million), a 1,603 percent increase in loss yearly.
Despite the loss, EBITDA rose by 579 percent yearly, to AU$200 million.
The majority of revenues were derived from the group’s Sydney operations, bringing in AU$541 million ($368.56 million), up 127 percent yearly, while its Gold Coast property contributed AU$276 million ($188.03 million) – up 53 percent, and its Brisbane operated added AU$196 million ($133.53 million), up 22 percent.
Speaking about the results, the group’s CEO, Robbie Cooke, noted that “We have been pleased with the ongoing strength of trading across our Queensland-based properties while trading at The Star Sydney has been impacted by operational changes associated with the outcome of the Bell Review and increased competition. Our focus has been and remains on working constructively with our regulators and the NSW Manager and Queensland Special Manager to urgently remediate our businesses as we seek to return to suitability”.
The Star has already notified that it was conducting an urgent review of operations, due to both the ongoing litigation and the proposed tax increases.
If the latter does not come about, some $276.57 million is still expected in fines associated with the multiple lawsuits it is facing due to alleged AML/CFT breaches.
An anticipatory note of the group’s operating outlook for fiscal 2023, ending June 30th, noted that the possible tax changes would have a ‘significant adverse impact’ on its profitability,
In the group’s results announcement on Thursday, it noted that it would ‘continue discussions with the NSW Government’ regarding the proposed increase in rates, noting that ‘unless the NSW Government and The Star reach agreement […] the changes as currently proposed are likely to have a significant impact on The Star’s earnings and operations’.
It also had previously noted that its bottom line would be ‘further compounded by the changing operating and competitive environment’ – as demonstrated by a 13.5 percent drop in domestic revenue as The Star Sydney (in fiscal 2H23), after the opening of Crown’s Bangaroo property – pilfering part of its higher-end clientele.
This comes even as the company has been found unfit to run its casinos, having an independent manager put into place as it attempts to return to compliance.
Legal proceedings by AUSTRAC into The Star continues, with the financial crimes watchdog telling AGB that ‘the court has made orders and set down timelines for next steps in […] the matters, which AUSTRAC will comply with’, further noting that ‘these are large, complex and highly detailed matters and it takes time to narrow the issues in dispute’.
AUSTRAC told AGB: ‘we continue to engage with […] The Star […] in relation to those matters’, noting that as litigation is ongoing and ‘whether a penalty is imposed and the amount of any penalty are unresolved issues before the court’.
The Star is also facing multiple class action lawsuits over alleged misrepresentations to shareholders over its compliance.
According to The Australian Financial Review’s Street Talk, The Star and Oaktree have spent weeks discussing possible funding options, which could result in the US investment group injecting hundreds of millions of dollars into the beleaguered Australian firm.