Bally’s Corp considered waiting for Star Entertainment to enter voluntary administration before investing but feared the Australian casino group would have been too hard to rescue, the U.S gaming firm’s chairman, Soo Kim, told Reuters.
Rhode Island-based Bally’s and the Mathieson family – Star’s largest investor – engineered a A$300 million ($188 million) rescue package, handing over the first A$100 million last week. The initial funds will keep Star afloat for 15 months while seeking regulatory approval for the full investment, Kim said.
Australia’s second-largest casino operator behind Crown Resorts, which is controlled by Blackstone BX.N, has been struggling to stay afloat amid a growing debt crisis and regulatory investigations over the past two years.
The rescue deal consists of multi-tranche convertible notes and subordinated debt instruments, Star said in an Australian Securities Exchange filing last week. Once the notes are converted, Bally’s and the Mathieson family will control around 56% of Star’s issued capital.
“This came together quickly this year but we had been looking at it for well over a year. When we saw the company start to sell their proverbial furniture, burn the furniture for firewood we decided to move,” Kim said in a telephone interview.
“We thought about waiting for voluntary administration but we thought, given there was a fire sale of assets, there might not be anything left if administration was to come.”
Star did not respond to a request for comment.
The firm had only one week’s cash to remain operational, the Australian Financial Review reported, when it first engaged with Bally’s after the latter’s initial bid in March.
Star said last month it would sell half of its A$3.6 billion Queen’s Wharf project in Brisbane to Hong Kong companies Far East Consortium International 0035.HK and Chow Tai Fook Enterprises for just A$53 million. It has also sold a theatre attached to its main casino in inner-city Sydney.
Its deal with Bally’s will see the U.S. group assume control should shareholders approve at a meeting in mid June. Star’s board has recommended shareholders vote in favour in the absence of a superior offer.
Bally’s has applied to New South Wales and Queensland governments and regulators for authorities’ approval, Kim said.
A spokesperson for Queensland’s attorney-general said the state is working with New South Wales counterparts on probity and suitability investigations as part of the approval process.
Kim will join Star’s board as an observer while the deal awaits regulatory and investor approval. He said Bally’s planned to re-focus Star on catering to Australian gaming customers rather than trying to attract overseas high-rollers.
“Gaming is a strange business, as good as it is fundamentally, gaming companies get in trouble all the time,” said Kim, whose firm operates 19 casinos across 11 U.S. states and one British asset, according to its website.
“For Star to end up near bankruptcy is not uncommon for the industry, it’s a small universe and we are one of the few players who specialise in turnaround casinos, so you can make an assumption that when a casino is in trouble we are shown that opportunity.”
($1 = 1.5898 Australian dollars)
Reuters
