Star Entertainment to raise $481M in equity as part of capital restructuring plan

Australian casino operator Star Entertainment is making its second foray into the capital markets this year, with the objective of securing A$750 million ($481.43 million) as part of a substantial capital restructuring to bolster its financial position.

On Monday, the company announced its plan to raise equity capital at A60c per share, representing a 20% discount to the closing price of A75c on the preceding Friday, Reuters reported.

The capital raising effort comprises A$589 million ($378 million) 1-for-1.65 pro-rata accelerated non-renounceable entitlement offer, along with an A$161 million ($103.3 million) institutional placement, as outlined in an official statement.

A "pro-rata accelerated non-renounceable entitlement offer" is a stock offering that allows current shareholders to buy more shares at a discounted rate based on their existing holdings, with no option to decline or transfer the offer. An "institutional placement" involves offering new shares directly to institutional investors at a predetermined price, typically below the market rate.

Star also disclosed plans to acquire A$450 million ($288.8 million) in new debt from Barclays and Westpac. Following the capital restructuring, the company will repay and cancel its existing debt, the report said.

It is noteworthy that in February, the company successfully raised A$800 million ($513.44 million) at A$1.20 per share, double the price of the capital raising initiative unveiled this week.

Star has faced challenges in the form of regulatory restrictions on its Sydney operations since mid-2022 and fierce competition from its larger counterpart, Crown Resorts. These factors have eroded the profits of Star, which ranks as Australia's second-largest casino operator.

As of June 30, the operator had a net debt of AUD596 million ($381.5 million), a strong reduction from its debt levels of AUD1.11 billion ($710.6 million) at the end of 2022. The business's gross revenue increased by 22% to AUD1.87 billion ($1.19 billion). The firm also posted a net profit after tax attributable, before significant items, of AUD41 million ($26.2 million) for fiscal 2023, versus a loss of AUD31 million ($19.8 million) a year earlier.

However, Star incurred a significant impairment charge of A$2.48 billion ($1.59 billion), excluding taxes. This charge stemmed from the need to write down significant items due to volatile operating conditions at its Sydney operations, as well as regulatory and legal expenses.