Can Star Entertainment survive? It’s a crap shoot

Needless to say the extreme pressure to sell assets places Star in a poor negotiating position – the equivalent of a forced seller.

Meanwhile, under new chief executive Steve McCann, the company has vowed to cut operating costs, but this strategy has been challenged by the additional expenses it continues to incur to meet regulatory changes including the introduction of carded play.

But lenders are Star’s only remaining hope. It is not in a fit financial state to seek capital from shareholders and the NSW and Queensland governments have indicated that any form of tax breaks for the casino is off the cards.

Star is a big employer and tourist drawcard in both states – with its flagship Sydney casino and large casinos in Brisbane and the Gold Coast. But the governments recognise that bailing out casinos is a politically dangerous move. They no longer seem to have a dog in this fight.

Should Star lose the support of its lenders and land in administration, it would be administrators who would seek to sell the company or break it up into bite-sized assets.

The company owes $10 million to the NSW casino regulator even before a yet-to-be-determined AUSTRAC fine (which could be as much as $300 million) has been levied.

It will also owe McCann as much as $10 million given he signed on to run Star with a generous contract that anticipated several outcomes including administration.

But the board has not yet raised the white flag. Its statement this week said it “continues to explore other liquidity solutions”.

It said the fall in cash reflected continued difficult trading conditions, thus its ability to trade its way out of trouble appears weak.

Indeed, a report from Macquarie Group analysts at the end of last year predicted that the company would still be delivering net losses to the tune of more than $100 million in financial year 2027.

All said, the 25 per cent fall in Star’s share price on Thursday could have been worse. Time will tell.

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