Star Entertainment reports $1.26bn loss for H1 2023

On Thursday, Star Entertainment Group announced a $1.26 billion loss for the first half of 2023 due to the fines and significant losses plaguing its Sydney casino. The amount is a huge hike on the $74 million loss the casino operator recorded for the same period a year earlier.

Star Entertainment released its half-yearly financial results ending on December 31 to the ASX. Its loss was reportedly a result of a $988 million write-down of the operator’s Sydney casino. Star’s profits are expected to go approximately $100 million lower if New South Wales enacts its bill to increase taxes on gaming venues, set to start in July.

Star Entertainment also revealed that it had secured $1 billion to smooth out its operations after the company was heavily fined late last year for a series of operational failures.

READ: Star Sydney fined $100m with licence suspension

Star’s chief executive officer, Robbie Cooke, revealed that the casino operator would kick start an $800 million capital raising and contemplate selling off its Brisbane real estate holdings for $233 million. Around $80 million of the equity raising will reportedly be handled by Star’s two existing investors, Far East Consortium and Hong Kong-based Chow Tai.

The gaming operator informed investors it had received allowances from lenders, which it owed a net of $1.1 billion, to increase Star’s debt covenants until June 2025. This is on the condition that the company raises the $800 million as stated.

Star revealed that the $800 million capital raise would include a $685 million non-renounceable rights offer to shareholders as well as a $115 million institutional placement. The company also added that the balance of the equity raising was underwritten.

“While the outcome of regulatory and other matters creates material uncertainty as to the Group’s ability to remain a going concern, the Group is likely to be able to meet its liabilities as and when they fall due over the next 12 months,” Star said.

According to Cooke, with the money, Star will get enough capital to keep it afloat for the next three years. The company will also be able to consider the balance sheet and other initiatives it initially planned to take.

“The $800 million resets our gearing at the right level, it delivers the right level of liquidity for the business, and right-sizes our balance sheet for where I think the business needs to go,” Cooke explained.

“There is never an absolute right number, but I don’t believe it’s too high. I don’t believe it’s too low. There is an element of conservatism in this definitely but positions the business for the next three years.

“We are going to have some moments where we’ve got some pretty big outflows. We are going to have some fines that are payable. The relief we’ve got enables the business to make those payments without actually tripping over any covenants.”

Since September 2022, when Star was found unfit to hold a gaming licence in New South Wales, the company’s market value has plummeted. Sydney is home to Star’s flagship property, and it has two other gaming venues in Queensland.

An investigation revealed that the casino operator had poor anti money laundering (AML) controls, was at risk of exploitation by criminal parties, and allowed customers to defy China’s capital controls.

Currently, all of Star’s casinos are headed by a government-appointed supervisor while the firm attempts to tighten compliance and regain regulatory approval.

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