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The Star Entertainment Group, fresh from announcing it had secured waivers for financial covenant testing by its lenders, has revealed in its audited financial report that it had $163.5 million in available cash last weekend, which was not enough to meet its current liabilities.
The cash balance, disclosed in the financial report released yesterday after the share market closed, has cast “significant doubt” about the group’s ability to remain a going concern.
The latest cash balance, with a record date of Sunday 26 September, is up from the $98.3 million in cash the company had on hand when it released its delayed half-year financial report in April.
However, the latest figure has been boosted by the $233 million received by 30 June this year from US casino operator Bally's Corporation and Bruce Mathieson’s Investment Holdings following their rescue deal announced in April.
The waivers to covenant testing secured by The Star from its lenders may have given the casino operator some breathing room to repay debt, but money owed to lenders are just part of the problem facing the company.
The Star has a growing list of financial obligations which includes remediation measures currently in train under the watchful eye of casino authorities in NSW and Queensland. Some of these obligations have yet to be quantified.
“Numerous material uncertainties exist that cast significant doubt on the group’s ability to remain a going concern,” says The Star in its audited FY25 financial report.
While The Star’s directors believe the group can continue as a going concern, the company says this depends on successful execution on “critical interdependent matters”, including any penalty that may be imposed by the Federal Court following civil action brought by the financial crimes watchdog AUSTRAC in 2022.
The financial crimes authority is seeking a fine of $400 million but The Star says anything more than $100 million would be “challenging”.
The company’s auditors at Ernst & Young highlighted material uncertainties around the group’s “going concern status”, particularly the AUSTRAC penalty and liquidity issues.
“Payments must not exceed the group’s capacity to pay,” says The Star in its financial report.
“The group currently lacks sufficient funding to meet all provisions and contingent liabilities, making it reliant on the AUSTRAC court judgment on quantum and timing.”
While the waiver secured from its lenders for the September quarter's covenant testing has given the company some breathing room, The Star says its ongoing viability depends on continued support from financiers, including “ongoing covenant waivers” under its syndicated facility agreement which stands at $430 million.
The Star is also sweating on regulatory approvals from the Queensland and NSW casino authorities to approve the $300 million rescue deal by Bally’s and Investment Holdings, of which $67 million remains outstanding.
The company says its exit from The Star Brisbane casino is equally critical to its survival, with the off-again, on-again deal currently waiting on long-form documentation to be finalised.
Last month, The Star finally secured a binding agreement with its Hong Kong partners to sell its 50 per cent interest in the Queens’s Wharf development in Brisbane.
The deal will see The Star eventually relinquish management of the Brisbane casino to another operator that will be ultimately chosen by its destination Brisbane Consortium partners Chow Tai Fook Enterprises and Far East Consortium.
The Star plans to consolidate its Queensland casino operations on its Gold Coast property, with the deal leading to the transfer of assets held jointly in Brisbane to the Hong Kong partners in return for assets held jointly on the Gold Coast being transferred to The Star.
“Timely completion of the JVP (joint-venture partnership) transaction stage is required, including transition to a new operator, to avoid delays in releasing escrowed operator fees,” says The Star.
The Star has agreed to remain casino operator at the Queen’s Wharf property until 31 March 2026 when the Hong Kong owners can replace The Star with another operator.
Adding to its woes, a dispute with the ATO is also in the mix for The Star over $155.7 million in GST payments. The company has already deposited $61.5 million with the ATO on a "no-admissions basis" with the amount listed on its books as a contingent liability.
The Star posted a $427.9 million loss for FY25 as revenue fell 18.8 per cent to $1.36 billion.
The company’s bottom line was impacted by an extra $103 million in employee costs, $172 million in depreciations costs and an extra $71 million in finance costs during the year.
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