Star Entertainment Group, one of Australia’s leading gambling and entertainment companies based in Brisbane, has publicly announced that it is collecting AUD$800 million, which is approximately 545 million US dollars, to pay back its debt and will suspend dividend payments.
The debt arose as the company posted a record statutory net loss for the first half of the year ended December 31 of AUD$1.26 billion, compared with a loss of AUD$74.2 million a year earlier.
Capital raising as a reason for statutory loss:
This loss was due to difficult business conditions in Sydney.
In this regard, company officials said: ” The half-year financial results included a $1.3 billion in what we would describe as one-off costs, like the expected changes to taxes, $350 million in fines and the expense of ongoing reviews and new systems to fix problems.
“The poor performance is reflective of increasingly restrictive operational requirements and amendments to the state’s Casino Control Act.”
However, that “one-off” cost could tend to be higher, because the official sale of two properties is counted against it.
What’s more, limitations by Australian regulators on the company’s Sydney subsidiaries since mid-September and tough competition from larger rival Crown Resorts, which opened there in August, have squeezed revenues for Star, currently Australia’s second-largest casino operator, by 14% compared to pre-pandemic levels.
Commenting on this, company officials said: “The capital raising, comprising a A$685 million 3-for-5 rights offer and a A$115 million institutional placement, will help Star repay debt and increase liquidity.”
Sale of shares as part of capital raising:
Star will also sell shares to collect money for debt, which is one of the main reasons for the loss of income. They are currently priced at AUD$1.20 per share, 21% beneath Star’s most recent closing price of AUD$1.52.
Commenting on the share sale, company officials said: “Major shareholders Chow Tai Fook Enterprises and Far East Consortium (0035. HK) have taken up their rights entitlements and committed $80 million to the capital raising.”
Many lawsuits by regulators:
Star Entertainment was previously warned of up to AUD$1.6 billion in damages in the first half due New South Wales government’s proposal to increase taxes on casino poker machine operators. Its license there was suspended and the company had to pay a fine of $100M. However, despite this, it managed to keep its gambling venue open until it decided on a new manager to supervise its gambling operations.
Increase in domestic revenue for some Star affiliates:
Still, the company’s subsidiaries Star Gold Coast and Treasury Brisbane grew domestic revenue by 30% and 9% respectively.