【Beast Below demo】Bally's offers Star Entertainment A$250m funding lifeline

The proposal, submitted in a letter to Star’s board and shared with the Australian Securities Exchange (ASX), outlines a capital-raising initiative in which Star would issue convertible notes, subordinated to the company’s existing senior lenders.

These notes would be convertible into at least 50.1% of Star’s shares, effectively giving Bally’s a controlling stake.

“We would also be happy to explore alternative structures that would similarly preserve value for all key constituents, including regulators, creditors, equity holders and employees,” Bally’s said in the letter.

Bally’s has pledged to underwrite the entire capital raise while expressing willingness to allow Star’s current shareholders to take part in a significant portion of the offering on a pro-rata basis. 

The company has framed its proposal as a strategic alternative to Star’s ongoing restructuring efforts.

Bally’s believes that providing long-term financial support, combined with its expertise in revitalising struggling gaming operations, would offer a more sustainable and effective recovery plan for Star.

The company pointed out in its letter that as of 31 December 2024, it held $171m in cash and no amounts drawn, apart from letters of credit, on a $620m revolving credit facility.

“In short, we have ample unrestricted liquidity to complete this transaction expeditiously,” it said.

Bally’s reports financial hit

In Bally’s latest financial report, the operator revealed that overall revenue declined by 5.1% to $580.4m for Q4 2024.

Casino revenue also fell by 5.2% to $324.4m. While the company’s UK interactive revenue saw an 11.3% increase, international digital revenue dropped by 9.1% to $214.5m.

One of the few areas of growth for Bally’s was its North American interactive segment, which saw revenue increase by 24.4% compared to the previous quarter, reaching $41.5m. 

Shares in Bally’s Corporation experienced a sharp decline on the New York Stock Exchange following the release of the results on 5 March, dropping 23.5% in value.

The stock closed at $12.99, a significant fall from its previous closing price of $17 the day before. By the end of trading on 7 March, it lost even more traction, falling to $12.12.

Shortly after the market closed, Bally’s executives abruptly canceled the company’s scheduled earnings call just minutes before it was set to begin. No explanation was provided for the decision. 

The mixed financial results, along with the sudden cancellation of the earnings call, contributed to concerns among investors, reflected in the sharp drop in Bally’s stock price.

Star becomes attractive target

Meanwhile, Star has been facing significant financial instability, compounded by regulatory scrutiny and declining revenues. Last week, the company announced a major restructuring plan aimed at stabilising its operations.

This included the sale of its 50% stake in Brisbane’s Queen’s Wharf casino to Hong Kong-based investors Far East Consortium and Chow Tai Fook Enterprises, its primary partners in the project, for A$53m.

Additionally, the company secured a A$250m bridge loan from US hedge fund King Street Capital Management and negotiated a broader debt refinancing deal worth up to A$940m.

Bally’s believes its funding proposal provides a better alternative to Star’s current restructuring efforts. In addition to the A$250m capital injection, the company has expressed openness to exploring further strategic transactions if required.

Bally’s has emphasised that its approach would focus on preserving and strengthening Star’s existing business structure, rather than overhauling or significantly altering its operations.

The Star board is currently reviewing the proposal but has not made any commitments to proceed with Bally’s offer. The company stated that while the proposal will be evaluated, there is no certainty that it will be pursued.

Ongoing investigation hints at more trouble

Star remains under significant financial strain. Trading in the company’s shares was automatically suspended after it failed to meet the deadline for lodging its half-year financial report.

Star’s struggles are largely attributed to falling revenues, heightened regulatory scrutiny, and substantial penalties for failing to meet compliance standards. 

In October 2022, the New South Wales (NSW) Independent Casino Commission issued a A$100m penalty against the operator, after uncovering instances of money laundering at its Sydney casino.

Additionally, a separate inquiry determined that the company had not implemented adequate measures to address problem gambling. 

Despite the company’s significant workforce of approximately 9,000 employees across NSW and Queensland, both state governments have declined to provide financial assistance, opting not to use taxpayer funds to support Star’s recovery efforts.

Star is also still being investigated by Australia’s corporate regulator, the Australian Securities and Investments Commission (ASIC). It has already issued fines totalling A$240,000 against two former Star executives for breaches of duty during their tenure at the company. 

Former CFO Harry Theodore received a A$60,000 fine and has been barred from managing corporations for nine months.

ASIC determined that he failed to prevent the company from providing misleading information to National Australia Bank in November 2019.

The inaccurate details related to the use of China UnionPay cards, which were reportedly misrepresented regarding their purpose in gambling transactions at Star’s casino. 

Former chief casino officer Gregory Hawkins was also fined A$180,000 and given an 18-month disqualification from corporate management. 

Hawkins was punished for not advising Star’s board to reassess or sever its ties with Suncity, the former Macau-based junket operator that had been linked to cross-border gambling and money laundering activities. 

In addition to these penalties, legal proceedings remain ongoing for nine other former Star directors and executives.