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The Star Entertainment Group (ASX: SGR) has secured an eleventh-hour reprieve from falling into administration with a new $940 million debt deal and plans to abandon its $3.6 billion Queen’s Wharf casino in Brisbane in a move that has the group doubling down on the Gold Coast market.
The plan, announced this evening after the share market closed, will ultimately see The Star make a complete exit of the Brisbane market and its 50 per cent interest in the Destination Brisbane Consortium for a cash payment of $53 million – or a little over half the equity contributions of $91.5 million the company made in the September quarter to complete the project.
The cash payment also includes full control of the company’s Gold Coast assets which it owns equally with its Hong Kong-based joint-venture partners in the Destination Brisbane Consortium - Chow Tai Fook Enterprises and Far Eastern Consortium.
The cash-starved company says it today received $35 million of the total cash consideration from its Hong Kong partners who will take control of The Star Brisbane complex by the end of the month.
The company says the funds will help meet the group’s short-term liquidity needs ahead of the new debt facility being finalised, while liberating the group from further equity contributions to the Brisbane project after 31 March 2025.
The Star will continue to operate the casino for at least the next year, until 31 March 2026, unless the Hong Kong partners seek an extension.
A new casino operator is expected to ultimately take on management of the property, with Adelaide casino operator Sky City and the Blacktsone-owned Crown Resorts flagged by market sources as potential operators.
In the meantime, The Star will receive a fixed fee from its Hong Kong partners for operating The Star Brisbane. The fee of $5 million a month will rise to $6 million per month after 30 June 2026 should an alternative casino operator not be secured.
In a major shake-up of The Star’s Queensland operations, the group will turn its focus exclusively to the more profitable Gold Coast market by acquiring full control of the Destination Gold Coast Consortium from its Hong Kong partners.
The move will see The Star lift its interest in the Gold Coast Consortium from 33 per cent to 100 per cent.
The buyout gives full ownership of the 313-room Dorsett hotel and the 202-room Andaz hotel which is nearing completion. It also gives the group development rights for the 6.7ha Broadbeach Island site where the master plan includes the potential to develop another three high rise apartment and hotel towers.
“This transaction is an important milestone for the company and contributes to providing a potential pathway towards financial viability,” says The Star’s CEO Steve McCann.
“Our team has worked hard to deliver The Star Brisbane and establish a new precinct for Brisbane. We are grateful for the efforts of all of our employees and we will work with our joint venture partners and the regulator to transition to a new casino operator in due course.”
McCann says the new focus on the Gold Coast will give The Star control over almost 1,200 hotel rooms, including the five-star Andaz which will open at the end of this year.
“Once we optimise these operations and our strategy, our full ownership of these hotels will enhance our integrated offering and provide an opportunity to improve the performance of the business,” he says.
“The receipt of cash funding will provide additional support in the near-term as we focus on putting in place additional liquidity measures and seek to implement a whole of company refinancing.
“This transaction is a step in the right direction for The Star. There are still a number of challenges that we need to address, including progressing short and long-term liquidity for the company.”
Firming up its pressing liquidity requirements, The Star has secured a $250 million bridging facility with alternative investment funds group King Street Capital Management.
The Star says the bridging facility has been put in place while the group works on a longer-term refinancing proposal for its existing senior debt.
A $750 million refinancing plan, with capacity to increase to $940 million, is currently being negotiated with an undisclosed party. The term is for five years, which is similar to a previously announced plan with Oaktree Capital Management which had proposed a $650 million debt facility over five years.
The Star says that because “certain conditions” of the Oaktree proposal have not yet been met, the company has not been able to finalise that refinancing deal “at the current time”.
“While there is more to do to have access to the funding from the bridge facility and the refinancing proposal, these initiatives, together with the agreement to exit Destination Brisbane Consortium and expand our operations at the Gold Coast, improve our capacity to have a viable future, both for the company and its stakeholders,” says McCann.
“We are now focused on implementing these proposals, including continuing our engagement with governments, regulators and existing lenders to seek their support for our plan.
“We also remain focused on implementing our plan to restore our licences.”
McCann says The Star still faces several risks, including the availability of funding and its ability to regain its casino licences in Queensland and NSW.
The CEO also notes the group is yet to resolve legal action from both regulators and shareholder class actions amid “a period of continuing lower revenue and negative cashflow”.
The Star Entertainment Group’s shares remain suspended by the ASX after the company failed to lodge its FY25 half-year profit result at the end of February.
The group said last week that it is unable to post its half-year results until it has had time to consider any refinancing or recapitalisation proposals that have been put forward.
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