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US casino giant Bally’s Corporation has made it clear it wants The Star to stay in Brisbane once its $300 million rescue deal for The Star Entertainment Group (ASX: SGR) is finalised, sending a clear signal to potential rivals eyeing the property that it plans to keep the group’s existing operations intact.
While Bally’s acknowledges that The Star has agreed to sell its 50 per cent interest in the $3.6 billion Queen’s Wharf development to its Hong Kong partners, it isn’t keen on relinquishing the management rights to the Brisbane casino when those rights expire next year.
“If the sale is consummated, we would prefer to continue to manage the property,” Bally’s told Business News Australia in a brief statement issued this morning.
Under the sale agreement struck with its Destination Brisbane Consortium partners - Chow Tai Fook Enterprises and Far Eastern Consortium - The Star is offloading its interests in the Queen’s Wharf project for $53 million cash and gaining full control of the Gold Coast assets that it has developed in partnership with the Hong Kong companies.
The move potentially could expose The Star to a dual-city casino battle in Queensland’s south-east corner as the group is assured of holding onto the Gold Coast property but risks losing its position in the Brisbane market.
While the sale of Queen’s Wharf is still subject to formal documentation which is expected to be finalised by the end of this month, The Star has been granted management rights to The Star Brisbane until the end of March next year.
After that, the Hong Kong owners of Queen’s Wharf could potentially secure a new casino operator for the Brisbane property, with the likes of Crown Resorts and SkyCity Entertainment Group (ASX: SKC) flagged as two potential candidates.
Until then, The Star will receive a fixed fee of $5 million a month to manage the casino which will rise to $6 million per month after 30 June 2026 should an alternative casino operator not be secured.
However, the statement from Bally’s this morning is the first sign that The Star casino brand could survive in Brisbane.
Bally’s Corp chairman Soo Kim has previously indicated that the US group, which owns 19 casinos in the US as well as online sports betting websites, is interested in maintaining The Star as a complete business with its operations in Brisbane, Sydney and the Gold Coast remaining intact.
In an interview with Inside Asia Gaming yesterday, Kim held out some hope that the Queen’s Wharf exit may not eventuate, citing The Star’s reputation for securing “lots of agreements” that didn’t end up settling.
“We’re just getting a handle on the entire situation,” Kim said. “We’re prepared to manage all of the assets as one group and we’re also prepared if the company does succeed in selling (The Star Brisbane) and then focusing on the two that remain.”
The $300 million rescue funding deal put forward by Bally’s comprises a convertible note and subordinated debt instrument that will see the noteholders secure a 56.7 per cent controlling interest in The Star.
The Star’s largest shareholder, pubs baron Bruce Mathieson, is investing $100 million in the bailout plan with Bally’s accounting for the balance.
When The Star announced the Bally’s deal earlier this week, the company said that it would receive the first $100 million tranche of the funding by yesterday, 10 April.
However, The Star has not made an announcement on whether these funds have been received.
The Bally’s deal is still subject to shareholder approval which is expected to go to a vote at a meeting scheduled for June.
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