Australia's renowned gambling giant, casino operator Star Entertainment Group (hereinafter referred to as Star), is currently in a severe financial crisis, with its capital chain at risk of breaking at any moment.
Star has already notified lenders that the company's cash reserves might last only one more week!
If new financial support is not obtained, the company may have to apply for bankruptcy with the regulatory authorities.
Currently, Star Entertainment operates casinos in Sydney, Gold Coast, and Brisbane, but the reality of depleted cash flow has put it in a desperate situation.
Insiders revealed that as of Friday night, Star Entertainment has still not finalized a short-term financing plan with lenders.
On February 28, Star Entertainment Group, deeply mired in financial troubles, was suspended from trading just minutes before the market opened on Friday due to its failure to disclose financial results.
According to requirements, Star Entertainment must publish its financial results before the opening of the Australian Securities Exchange (ASX) this Friday.
At 9:54 AM on Friday, the ASX announced that its stock trading will be "temporarily suspended, pending further announcement."
Trading resumed at noon on Friday, but by the close of trading, the stock price had plummeted by 15%, with a share price of 0.11 Australian dollars.
Over the past year, Star's market value has evaporated by nearly 80%.
The issues with Star were first exposed by journalists in 2021.
This directly prompted the NSW Independent Casino Commission to initiate an investigation, led by senior barrister Adam Bell SC.
On August 31, 2022, Bell released a 946-page investigative report, concluding that Star is unsuitable to continue holding a casino license in New South Wales.
Two months later, the NSW regulatory authority announced:
Star's casino license was indefinitely suspended, and it was fined 100 million Australian dollars, with an independent administrator appointed to take over operations.
At that time, Star Entertainment Group disclosed that as of early January, the company had only 79 million Australian dollars in unrestricted cash on hand.
And they still owed lenders 430 million Australian dollars, having already mortgaged company assets.
In an attempt to save itself, Star sought support from external investors, such as Australian tycoon Bruce Mathieson and Chow Tai Fook, but their capital restructuring and asset purchase proposals were unsuccessful.
Additionally, international investment institutions Oaktree Capital and Cerberus Management also attempted to negotiate with lenders, but no agreements were reached.
Entering February, the Australian corporate regulator ASIC suddenly launched a lawsuit against Star's executives and directors in the Federal Court!
ASIC believes they failed to fulfill their responsibilities, hence suing several former directors and executives, including the former CEO.
Specifically, it concerns whether Star's board of directors and executives took seriously the risks of money laundering and collusion with criminal organizations, especially in their casinos in Sydney and Queensland.
In the days leading up to the trial, ASIC told the court that Star's board had long been warned about the risks of money laundering involving VIP casino clients linked to criminal organizations, but they chose to ignore these warnings.
In court, ASIC described Star's executives and board of directors as "uncaring, unconcerned," with large amounts of cash being brought into private gaming rooms in blue coolers or paper bags.
If the allegations are proven, the victims will not just be shareholders. Anti-money laundering laws exist to crack down on criminals laundering illicit funds.
Although not accused in this case, money laundering generally leads to crimes such as fraud, deception, exploitation of children, and drug/sex trafficking.
There are many victims in society.
So, how much responsibility should Star's directors bear?
From the defense during the investigation period by barrister Adam Bell SC, a possible argument is: they were not directly involved in the complex day-to-day operations, but rather, the executives did not report risk management issues to them.
According to the standards of the Australian Institute of Company Directors (AICD), of which all of Star's directors are members, directors must "critically scrutinize the information provided by management and actively consider what additional information they need."
Looking at the directors' salaries, Star's former chairman John O’Neill received a salary of 484,500 Australian dollars in the 2021 fiscal year.
With such high salaries, shareholders rightly expect them to raise some sharp questions, especially when so many warning signals have already appeared.
In fact, the board could have requested more in-depth investigations from internal audit teams or independent external consultants, but they did not do so.
Therefore, ASIC took action.
This lawsuit is expected to last six weeks, and the defendants deny any dereliction of duty.
This lawsuit is also considered a landmark case in the field of corporate governance in Australia.
Because, the scandal at Star is not an isolated incident.
The Royal Commission also found that Crown Casino's board similarly failed severely in managing money laundering risks.
Australia's financial crime regulator Austrac also found similar issues involving the Commonwealth Bank of Australia (CBA), Westpac, and Adelaide's Sky City Casino.
Although most of these companies were fined by regulatory authorities, the impact on individual directors was almost nil, with virtually no consequences at all.
For a long time, ASIC's reputation as a corporate regulator has been greatly affected, neither protecting shareholder interests nor truly safeguarding public interests.
This is why the outcome of this lawsuit is so important.
If ASIC wins, it will send a clear signal to all company directors that risk management is not a mere formality, but a responsibility that must be taken seriously!
Star is currently operating under "safe harbor" provisions, which are designed to protect directors from legal liability when the company is insolvent.
But the reality is, the company is barely able to pay its employees, and lenders have not yet agreed to provide new funds.
What's worse, due to strict regulatory crackdowns, the core gambling business is suffering heavy losses, and high rollers are leaving in droves.
Moreover, the amount of the huge fines the company faces is still unknown.
All signs indicate that Star is now standing on the edge of a cliff.
If no new funds are found, bankruptcy or takeover seems only a matter of time.
Insiders revealed that Star's current CEO Steve McCann is urgently consulting with bankers, hoping to find a solution, including debt financing and short-term loans, but still no definite funds have been secured.
Additionally, since the company's financial report has not yet been approved by the board, the market fears that Star's stock might be suspended again on Monday.
On Friday, Star informed investors in an announcement that the company is waiting for a liquidity proposal, hoping to improve its financial situation.
At the same time, it also acknowledged that it is uncertain whether it can continue to operate.
This entertainment giant can be said to be a mere shadow of its former self!
