Star sees refinancing proposal withdrawn as Bally’s talks reignite

Star said in an ASX filing Wednesday that the proposal, tendered by Salter Brothers, has been withdrawn. The proposal, first announced on 7 March, would have allowed for relief of up to AU$940 million (£453.2 million/€544 million/$588.5 million), enough to restructure all of the company’s existing debt.

Star had previously extended an exclusivity period for the negotiations in hopes of pushing it over the line, but certain conditions could not be met.

“The withdrawal of the Refinancing Proposal follows extensive engagement by The Star with Salter Brothers Capital and relevant third parties, including state governments and regulators,” the company said. “As a result of that engagement, it became apparent that it was unlikely that a number of the conditions precedent to the refinancing proposal would be able to be satisfied, either at all or in sufficient time to address the current liquidity needs of the company.

“In particular, lender requirements for specific priority arrangements and enforcement rights in relation to their proposed security over non-gaming assets of The Star could not be met.”

Without an agreement, Star is still unable to file its H1 financial report for the period ended 31 December. Its shares remain halted from trading as a result.

Bally’s talks back on

The extension of the Salter Brothers negotiations was an indication that Star favoured that route. But following the withdrawal, no other lifelines appear available to keep the company afloat independently. As such, Star has begun “engaging with Bally’s Corporation in relation to the proposal received on 10 March”.

Bally’s in February sent reps to meet with Star and tour its properties. Then on 10 March it submitted an AU$250 million offer for 50.1% of the company. That offer expired without action 28 March, but things could move quickly without other options.

Bally’s did not respond to a request for comment Wednesday.

Star’s largest individual shareholder, Bruce Mathieson, lobbied heavily for the Bally’s deal. The Australian Financial Review reported on 22 March that Mathieson was willing to inject an additional AU$50 million to help facilitate it, in exchange for a larger stake and board seat.

Queen’s Wharf deal a factor

The Bally’s offer is complicated by the fact that Star on 7 March announced its intention to exit its multibillion-dollar Queen’s Wharf joint venture in Brisbane. Its 50% stake in the JV was sold for AU$53 million to existing partners Chow Tai Fook and Far East Consortium. The price was heavily discounted, but the key for Star was relinquishing its financial commitments and debt stake in the project.

Bally’s, however, did not support that deal and wished to keep all of Star’s assets together. Its offer letter, tendered just days after the announcement, contended that “our proposal offers Star and its stakeholders far greater value and operational flexibility, as well as the upside from retaining Star’s current projects and other assets”.

Bally’s chairman Soo Kim previously told the AFR that “it is not too late” to pursue a deal. It is unclear at this time whether Star would be able to cancel its Queen’s Wharf sale.