Star Entertainment Group finds itself in a difficult position. After the group thought that it was out of the metaphorical woods, with a lifeline offer thrown over by Bally’s and Bruce Mathieson’s Investment Holdings Pty Ltd, which pitched an AU$250m – AU$300m collective deal.
AFR sources cite regulatory hostility towards Bally’s rescue package
However, soon after, Bally’s raised concerns that the deal could fall through if Bally’s failed to maintain profitability. Now, though, a new potential hurdle has emerged, according to the Australian Financial Review, which did the original reporting, and which cited two of its sources close to the matter, who remained anonymous.
The latest opposition may not come from within but from an external source – the regulator, the NSW Independent Casino Commission, and Chairman Philip Crawford supposedly said that he was "far from satisfied" with the current leadership in the company, referring to Star Entertainment.
In other words, the NSW is not convinced that a bailout deal with the current leadership would create the conditions for Star Entertainment Group to return to not just profitability but also avoid future mismanagement.
While there have been developments at the C-suite level, these may not be sufficient, including the appointment of Group CEO and Managing Director Steve McCann, who has instilled confidence in the prospects of the property.
Surprisingly, though, Crawford may be doubtful over Bally’s ability to run a casino license. According to the Australian Financial Review, the regulator’s Chairman expressed his doubt about how Bally’s Corporation would handle a license.
The regulator is reportedly demanding that the company provide "clear and convincing evidence" that it can run a casino floor.
"The commission (sic) will examine Star’s financial circumstances and ask Bally’s to outline its plans for the Star, including any changes in leadership and plans for the financial management of the business."
Bally’s has the track record to turn Star’s fortunes around – but can it prove it?
The remarks are surprising, given that Bally’s Chairman Soo Kim has reaffirmed Bally’s Corporation’s commitment to making things right with Star Entertainment and tapping into its experience turning moribund gambling properties into winners.
Bally’s Corporation has already demonstrated its ability to pull distressed assets from the brink and capitalize on them. In the meantime, AUSTRAC, the financial watchdog, is set to impose a fine that could rival the one imposed on rival Crown Resorts or even exceed that amount.
Should this happen, Bally’s Corporation may choose to pull out of the deal, fearing that its rescue package would go towards covering those costs rather than focus on Star Entertainment Group’s future.
