The Star Entertainment Group has secured a new debt facility of up to AUS$200m from its corporate lenders, to be delivered in two tranches.
Effective upon completion of long-form documentation and satisfaction of various conditions precedent, the group’s existing $450m facility has now been reduced to $334m and fully drawn.
The agreement has been in the works between The Star and its lenders and various advisers for the past several weeks, to help finalise its preliminary financial report for the financial year ending 30 June 2024.
This included holding discussions with various stakeholders about its liquidity position in light of adverse trading and other conditions. It also follows an independent inquiry into The Star by Adam Bell SC on behalf of the New South Wales Independent Casino Commission, which highlighted continuing regulatory shortcomings for the operator.
For the new debt facility, covenant waivers will be provided by the company’s lenders for the next two testing dates – 30 September 2024 and 31 December 2024 – with the latter date being subject to execution of long-form documentation for the new debt facility and other customary conditions.
Splitting the $200m across two tranches, the first tranche of $100m is expected to be available to be drawn from the end of October until 20 December 2024, subject to certain conditions precedent being met.
These include:
Subject to more extensive conditions precedent, the second tranche is expected to be available to be drawn from the end of December with a four-month availability period following the drawing of the first tranche.
These conditions include:
Assuming cash pay is elected, the all-in coupon for the new facility is 13.50% per annum, and the existing $300m term facility has been repriced to this level:
The maturity date for the new facility is December 2027, consistent with the existing term loan. Up to $34m of bank guarantees will be retained by the group under the existing revolving credit facility.
Following securing the new debt facility, The Star has posted its FY24 financial results, reporting $1.68bn in revenue and EBITDA of $175m, but also a statutory net loss of $1.69bn after significant items, including a $1.44bn non-cash impairment charge.
The operator noted that trading performance has “deteriorated” during the second half of the financial year, with this trend continuing into FY25. For July and August 2024, the operator has reported an EBITDA loss of $6.6m and $1.1m, respectively (2023: positive EBITDA of $20.3m and $21.6m respectively).
The Star noted that monthly operating expenses through H2 FY24 trended up following an “increase in ongoing transformation and remediation related activities offsetting The Star’s previously announced cost reduction program”.
Increases occurred for employment costs as well “with additional costs in risk and control functions” offsetting savings achieved elsewhere in H1.
“There are a number of significant challenges currently facing the business from an earnings, liquidity and balance sheet perspective,” stated Steve McCann, The Star Group CEO (subject to regulatory approvals).
“We recognise and appreciate the support provided to date by our stakeholders as The Star puts in place a new management team and strategy to implement a remediation and transformation program and return the company to a more sustainable footing.
“We have identified a range of initiatives to improve business performance and cashflow, as well as providing the organisation with additional liquidity. However, time and flexibility is required to implement these initiatives.
“As we work through these initiatives, the Board and management team remain focused on demonstrating suitability to hold our casino licenses and regaining the trust and support of our regulators and the broader community while seeking to enhance shareholder value.”
