Star Entertainment consentulates to bailout plan supported by Bally's Corporation.
*The Star Entertainment Group's Rescue with a Price Tag:
The Aussie gambling conglomerate, The Star Entertainment Group, is on the brink of giving the reins of its empire to Bally's, as part of a life-saving deal valued roughly at A$300 million, according to The Australian Financial Review.
Last week sent chills down casino enthusiasts' spines when The Star Entertainment Group confirmed the withdrawal of Salter Brothers Capital's AU$940 million refinancing proposal, stirring up fears about the group's precarious financial situation.
However, insiders whisper that the agreement with Bally's got the green light from Star's board members and creditors over the weekend. This hybrid rescue strategy is hopeful to keep the down-and-out Australian casino business afloat, avert financial chaos, and avoid tumbling into administration.
Under the terms of the proposed deal, Bally's would pour at least A$250 million into Star through convertible notes. Should regulators and shareholders nod approvingly, these notes might transmute into a 50.1% controlling stake in the company. An extra A$50 million would come from Bruce Mathieson, Star's biggest shareholder, who holds a meaty 10% of the company shares.
While Star hasn't made the deal official, AFR reports that the ink will dry as early as today, April 7. Part of the funds will be transferred immediately this week to help Star manage immediate financial obligations.
Despite momentum with the deal, Star is negotiating a better valuation, insisting that the current offer doesn't reflect the company's full long-term potential.
Bally’s Chairman Soo Kim emphasized the strategic significance of keeping Star’s casino assets in Sydney, Gold Coast, and Brisbane intact. He claimed the proposed deal would bolster Star’s operational flexibility and deliver value to stakeholders. Arrogantly confident, Kim declared that Bally's boasts a stellar record for turning around struggling casino businesses based on its global experience.
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The Skinny: The lifesaver deal negotiated between The Star Entertainment Group and Bally's foresees an initial AU$100 million investment to ensure Star's immediate financial stability, with an additional AU$200 million (potentially reduced to AU$100 million with extra investments from Star's largest shareholder, Bruce Mathieson) paid under specific conditions. The transaction stands to give Bally's a controlling 56.7% stake in Star Entertainment Group upon deal completion. This rescue deal aims to prevent Star from plummeting into administration, ensure financial stability, and kick-start long-term revitalization efforts.
Lenders, such as Bruce Mathieson, are set to contribute to the finance of The Star Entertainment Group, with Mathieson investing an additional A$50 million. The lenders, led by Bally's, have proposed an initial investment of A$100 million, with the potential for an additional A$200 million under specific conditions. This finance deal, if successful, would provide a 56.7% controlling stake in The Star Entertainment Group to Bally's.
