Star Entertainment Group to engage Bally's after failed refinancing proposal

• Star Entertainment Group confirms failure of the Slater Brothers Capital
• The company is now cash-strapped and faces a short-term liquidity crunch
• Star will continue to engage with Bally’s and explore other opportunities

Star Entertainment Group hoped for the best, but it ended up with nil. The Australian gaming major was looking to solicit refinancing from private equity firm Salter Brothers Capital for up to AU$940m, but the move ultimately failed, as confirmed by the company in a filing to the Australian Stock Exchange on Wednesday.

Star’s best debt refinancing option is now off the table

Rather, Star is now turning to pursue another popular proposal – the one pitched by Bally’s Corp., which sought to secure a controlling stake in the company and tabled its offer in early March, around the same time Salter Brothers Capital did. Bally’s said it would buy a 50.1% share in the company for AU$250m.

The Salter Brothers Capital proposal fell through because, as Star pointed out in the ASX filing, there were a number of business and regulatory conditions demanded by regulators and governments, that were difficult to complete in the allocated time.

Star argued that its liquidity needs pressured it to the point where it would not be able to go through the required processes to obtain the go-ahead from watchdogs in the available time. A particular point had to do with the priority arrangements and enforcement rights that relate to the proposed security of Star’s non-gaming assets.

One of Star’s shareholders has already expressed interest in backing the deal with Bally’s and added that he would be willing to also contribute more to the company’s cash-strapped coffers. As to Star, the firm confirmed that it is now engaging with Bally’s Corp. once more in hopes of addressing its liquidity needs that have pressured them in the mid-term.

Bally’s Corp. has generally signaled confidence in the Star Entertainment Group’s prospects, hailing the company as a leader in its field despite the current difficulties.

Bally’s Corp. keen to see Star Entertainment thrive

Australian gambling giants have been struggling for the past several years, rocked by falling footfall at their casinos and hospitality properties, as well as increased regulatory scrutiny, which has resulted in stiff penalties and increased spending on compliance and responsible gambling measures.

What happens next for Star Entertainment Group is anyone’s guess, but it would be interesting to see if Bally’s Corp. would be willing to pay AU$250m for the stake, given that Star now has virtually no other options for the time being.

In the meantime, by acquiring the controlling stake in the company, Bally’s Corp. would be keen to plow its own cash into it to make it profitable and steer it out of the debt sinkhole.

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