Embattled Australian gaming operator The Star is facing yet another hurdle as it tries to stay out of bankruptcy, with its joint venture partners in the Queen’s Wharf Brisbane integrated resort indicating they would like to pull out of a deal to purchase its equity stake in the project.
In early March, The Star (in the midst of dire financial straits) negotiated with Chow Tai Fook Enterprises (CTFE) and Far East Consortium International (FEC) for the sale of its equity interest in Destination Brisbane Consortium (DBC).
The deal allowed for The Star to release itself from debt obligations linked to the DBC – totaling round 50 percent of AU$1.4 billion ($880.7 million), plus an expected AU$212 million ($133.36 million) in expected further equity contributions.
The deal also would allow The Star a fixed monthly fee under a casino management agreement and a possible consideration from an earn-out mechanism for The Star Brisbane.
But in Monday filings to both the Hong Kong Stock Exchange and the Australian Securities Exchange, The Star and Far East Consortium indicated that the Hong Kong-based joint venture partners issued ‘a notice to terminate’ the binding heads of agreement (HoA) for the deal.
This termination of the HoA would take effect on Monday, July 7th.
FEC, in its filing noted that, upon termination of the HoA ‘the parties are required […] to be restored to the position they were in immediately prior to entry into the HoA’.
This would involve The Star repaying the JV partners AU$10 million ($6.54 million) each ‘by no later than 30 days of the date of termination’.
If the amount is not repaid during the period, ‘The Star will be required to instead transfer The Star’s 33.3 percent interest in Tower 1 [….] to the JV partners.
Additionally, the JV would no longer be required to make a third tranche payment to The Star of AU$8 million ($5.24 million).
The announcement comes at a crucial period for The Star, after shareholders – including CTFE and FEC approved an AU$300 million ($196 million) rescue package from US gaming giant Bally’s Corporation and pokie baron Bruce Mathieson’s Investment Holdings’.
The Star has already received some AU$133 million ($87.04 million) in funding from Bally’s Corporation and Investment Holdings since the vote was held.
In regards to the possible termination of the Queen’s Wharf Brisbane agreement, The Star notes that it ‘remains willing to continue negotiations’ with the JV partners.
