Bally’s to take control of Star Entertainment in $180 million bailout deal as financial pressure mounts

Star Entertainment has entered into a rescue agreement with US-based Bally’s Corporation that will transfer control of the Australian casino group to the American operator in a deal valued at A$300 million ($181.5 million). The company disclosed the agreement in a filing to the Australian Securities Exchange (ASX) on Monday, April 8.

The funding, which includes an immediate A$100 million ($60.5 million) injection expected by Wednesday, is designed to help the company meet its immediate financial obligations. 

Bally’s will contribute approximately A$250 million ($151.33 million) through multi-tranche convertible notes and subordinated debt instruments, while Star’s largest shareholder, billionaire pub baron Bruce Mathieson, is in discussions to provide up to A$100 million ($60.5 million) of the total package. 

Should Mathieson proceed with the full contribution, Bally’s stake would be adjusted to A$200 million ($121 million). Upon conversion, Bally’s would own around 56.7% of Star on a fully diluted basis, subject to regulatory and shareholder approval. A shareholder vote on the transaction is expected in late June.

The deal, first reported by The Australian Financial Review, has been approved by Star’s board, chaired by Anne Ward, and supported by its lenders. Sources familiar with the negotiations, who were not authorized to speak publicly, indicated that legal formalities are being finalized, with a signing anticipated within days.

The agreement marks a turning point for Star, which has faced a series of financial and legal difficulties. The company has been the subject of regulatory probes over alleged money laundering practices and saw a collapse in revenue from international high-roller clients. 

In January, Star CEO Steve McCann revealed the company had just A$79 million ($47.82 million) in cash on hand, which prevented the board from signing off on its half-year financial statements.

Star CEO Steve McCann

McCann, who took over leadership in July 2023, had pursued several funding options, including a proposed A$750 million ($456 million) deal from Salter Brothers and a separate A$250 million ($151.33 million) offer from US-based King Street Capital Management. Neither offer materialized.

As part of the new arrangement, Star will also sell its 50% stake in the Queens Wharf Brisbane development to its partners, Chow Tai Fook Enterprises and Far East Consortium, for A$50 million ($30.27 million) in cash and a share in associated Gold Coast hotel assets.

Bally’s, which owns 19 casinos across the United States, began its interest in Star earlier this year, with Chairman Soo Kim visiting Australia in February. Kim had previously met with Star’s financiers in New York in September 2023. His formal offer was submitted on March 10, according to AFR.

Mathieson currently holds a 10% stake in Star and has regulatory approval to increase his stake to 20%. If the deal proceeds, his involvement in board-level decision-making is expected to expand.

Star’s shares remain suspended from trading on the ASX, with the company unable to file its half-year results without a finalized refinancing plan. The last traded price for Star shares was A$0.11 ($0.067), giving the company a market capitalization of A$316 million ($191.28 million).