Star Entertainment Group’s leadership has secured a bit of breathing room after completing an $800 million capital raising from retail and institutional shareholders in the face of a bleak outlook for the country’s second-biggest casino group.
The wagering giant announced on Thursday it had raised $203 million from retail shareholders at $1.20 a share, after securing $595 million from institutional shareholders earlier this month.
The Star’s chief executive Robbie Cooke. Credit: Louie Douvis
The Star’s chief, Robbie Cooke, said the group was extremely appreciative of the retail shareholders’ contribution.
“As conveyed at the time of the institutional entitlement offer completion, the capital structure initiatives will provide The Star with a strengthened balance sheet to deliver on its key strategic priorities and to meet the capital requirements provisioned for,” he said in a statement.
About 10,100 retail shareholders applied for their entitlements, or about 53 per cent of the group’s eligible pool. Approximately 80.5 million new shares that were not taken up under the retail entitlement offer will be taken up by the sub-underwriters of the share sale. Barrenjoey and Macquarie Capital were confirmed to be working on the equity raise after The Star walked away from distressed debt negotiations with Oaktree Capital Management ahead of the capital raising announcement last month.
The Star revealed a $1.3 billion net loss for the December half after a torrid six months marred by four shareholder class actions, the suspension of the company’s Sydney casino licence and an escalating number of fines that could stack up to hundreds of millions of dollars.
The Star has also been the focus of two independent inquiries in NSW and Queensland following an investigation by this masthead in October 2021. The inquiries found the casino operator had enabled suspected money laundering, large-scale fraud, organised crime and foreign interference in its Australian casinos.
The company’s shares have fallen more than 65 per cent in the past six months, and hovered at $1.42 in mid-morning trade.
Adding to The Star’s concerns is the NSW government’s proposed tax rise on poker machines that would result in poker machine profits being taxed at a top rate of 60.7 per cent from July. The current tax rate is 31.57 per cent.
The duty rate increase would have devastating consequences for the business, which is already struggling to shore up its profits, weighed down by more than $1.1 billion in debt as of December. Cooke has said he would be forced to slash $100 million from Star Sydney’s $450 million cost base.
Despite some speculation that the government could tweak the policy before the pre-election caretaker period commenced on March 3, the tax rise was locked into NSW Treasury’s pre-election budget outlook.
In a further blow to the casino operator, Labor said on Thursday it had no plans to reduce the tax rate if elected on March 25.
Opposition treasury spokesman Daniel Mookhey acknowledged the impact the tax rise could have on The Star’s workforce, but shot down any suggestion that a future Labor government would unwind the policy.
“We can’t make that commitment and, as we said at the time, it’s now been written into the budget and that has real implications as well,” he said last Thursday.
“We’re not going to this election with any proposal to reduce gambling taxes.”
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