Yahoo Finance Star Examines Its Liquidity Before Key Sydney Casino Verdict
(Bloomberg) -- Star Entertainment Group Ltd. is assessing its financial liquidity as it prepares for a critical verdict from the regulator on the future of its flagship Sydney casino.
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An inquiry last week found Star remained unfit to operate the casino — hamstrung by inaction, dysfunctional leadership and questionable ethics. As the company awaits the regulator’s formal response to the damming probe, new Chief Executive Officer Steve McCann is trying to win time with a salvage plan aimed at preventing a corporate disaster.
“Star is currently reviewing its financial and liquidity position with various advisers,” the company said in a statement late Wednesday — its first formal communication with the market since its shares were halted last week, then subsequently suspended from trading.
The company said it was still finalizing its earnings report for the year ended June 30, a document that was due last week, and a release date hasn’t yet been fixed. Star plans to provide a financial and liquidity update at the same time. The shares will resume trading once the earnings are released.
The most severe determination by the regulator in New South Wales state would be the immediate cancellation of Star’s Sydney casino license, a decision that would have far-reaching financial and economic fallout. But even the most lenient punishment — letting Star continue to operate in the city under government supervision — would force McCann into costly and lengthy reforms with no guarantee of final redemption.
More broadly, McCann has also inherited a thorny basket of falling revenue, spiraling expenses and wary consumers. Meanwhile, Star’s costly new Queen’s Wharf gaming resort in Brisbane is also operating under government supervision.
McCann’s immediate priorities are likely to be renegotiating Star’s debt and obtaining tax relief from state authorities in Queensland and New South Wales, said Leo Partridge, an analyst at Morgans Financial Ltd. in Brisbane.
“It’s just a bad cocktail,” Partridge said. “We knew the results were going to be bad, and they will be, but most of the concern is around the balance sheet.”
According to the Australian Financial Review on Thursday, lenders are resisting Star’s requests for additional short-term debt, insisting that new loans should be twinned with government tax concessions. Ballooning costs at Queen’s Wharf have also surprised Star’s secured lenders, which are owed A$450 million ($302 million), the AFR said. A cash shortfall has so far prevented Star’s directors from signing off on the fiscal-year results, the newspaper said.
License Breaches
Shoring up Star’s finances is key because the Sydney regulator needs to be convinced that the company is financially stable in order to keep operating the casino — in any capacity.
Philip Crawford, chief commissioner of the New South Wales Independent Casino Commission, said last week that the inquiry showed Star had failed to adequately address long-standing governance concerns. Lawyer Adam Bell, who led the probe, said in his report that Star had failed to put a new culture in place, partly blaming an excessive concentration of power inside group corporate headquarters.
Bell also detailed several events at Star’s Sydney casino that constituted license breaches. For example, in June and July last year faulty ticket-in, cash-out machines erroneously dispensed A$3.22 million to customers. Eighteen people, responsible for about 1,800 transactions on the machines, engaged in deliberate fraud, the report said.
The report also said some staff on the casino floor this year falsified records to suggest they had intervened to stop gamblers playing slot machines too long without a break — one of the requirements of Star’s license. The employees’ conduct was “systemic and extremely serious” and put customers at risk of gambling harm, Bell said.
Star’s shares have been suspended in Sydney since last week. The stock has slumped more than 50% in the past year, slashing the company’s value to A$1.3 billion.
In McCann’s favor, Crawford has said transparency and cooperation with the regulator has improved since McCann took over two months ago. He was appointed after a period of boardroom upheaval at Star during Bell’s inquiry that saw several executives including former CEO Robbie Cooke and Chairman David Foster leave.
But the report’s findings last week also underscore the size of McCann’s turnaround job.
An ethics assessment commissioned by the Star concluded that a set of “shadow values” inside the company were subverting the integrity of staff. These values included ‘profit matters most’ and ‘play politics to stay alive and thrive,’ Bell said in his report.
Star’s Sydney casino has been run by a government-appointed manager since a seperate report in 2022 found it had lax anti-money laundering controls, allowed patrons to flout China’s capital controls and encouraged problem gamblers. The manager’s term is due to expire on March 31, 2025.
(Updates with Star’s other difficulties in sixth paragraph, analyst comment in seventh.)
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