The Star confirmed on Wednesday it had received commitments from lenders to issue a new loan of up to $200 million across two tranches, the first of which is expected to be drawn from next month to quell a cost blowout at its newest casino precinct in Brisbane that is at the heart of its financial distress.
The emergency loan puts an end to extensive discussions between McCann, lenders, investors and state governments after a torrid period that brought the group to the brink of insolvency.
The group said revenue across Star Sydney’s gaming floor has dropped 10 per cent since the introduction of carded play in its VIP gaming floor last month. The NSW government has already staggered the rollout of mandatory carded play until October next year to give the embattled business time to get its systems in order, but McCann conceded the early signs look bleak.
The Star’s pubs and clubs competitors operate 98 per cent of the state’s poker machines and are still able to accept cash.
“There is a possibility for a further impact,” said McCann. “We’ve run a range of scenarios in our modelling, and we have sought to put ourselves in a position where our liquidity can cover those scenarios. One of those scenarios is that it gets worse given we’re only in the first phase of it.”
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The Star’s new loan comes with strict conditions, requiring the company to come up with an additional $150 million – which could mean selling off one of its properties – and a long-term strategy.
The Queensland government had been considering issuing $60 million in tax relief to the struggling business, while NSW has already delayed tax increases until the end of this decade.
But the negotiations between Queensland and The Star seem to have broken down. On Thursday, Queensland Premier Steven Miles slammed the group’s leadership and said discussions had stalled over McCann’s refusal to waive executive bonuses.
“There will be no consideration of any kind of arrangement while their executives insist on paying themselves performance bonuses,” Miles said. “And we’re unlikely to reach one. Frankly, I find it astounding.”
Adam Bell, SC, was commissioned by the NSW casino regulator to launch a second probe into The Star following concerns it had not adequately committed to cultural reform since it was exposed for extensive anti-money laundering and counter-terrorism failings in 2021.
The Star is due to write to the regulator by Friday with reasons it should be able to continue operating following the inquiry.
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