A new report is raising questions about whether Bally’s Corporation will be able to follow through with its plans to inject more cash into The Star Entertainment Group.
The casino operator is already under pressure from financial troubles and regulatory challenges, and this investment is part of a broader effort to stabilize the business.
The report, prepared by an independent consulting firm hired by The Star, points to several potential hurdles that could limit Bally’s ability to deliver its share of the AUD 300 million ($193.5 million) funding package.
The funding is seen as essential for the company’s survival, with Bally’s expected to contribute AUD 200 million ($129.1 million) and Investment Holdings Pty Ltd, The Star’s biggest shareholder, chipping in AUD 100 million ($64.5 million).
The Star faces serious challenges
In documents despatched to shareholders on Monday (May 26), The Star said that “At the Meeting, Shareholders will be asked to consider for approval two non-inter-conditional resolutions relating to the Strategic Investments in The Star by each of Bally’s Corporation…and Investment Holdings… for an aggregate amount of $300 million.” The resolutions will be put to a vote at the general meeting scheduled for June 25, 2025.
The report points to execution risks surrounding the full deployment of Bally’s capital, particularly given “uncertainty as to [The Star’s] ability to continue as a going concern amid a challenging operating environment.”
The notice of meeting reveals that The Star is facing a number of serious financial pressures, including civil proceedings from AUSTRAC, a class action lawsuit, and unpaid liabilities owed to the NSW Treasury. All of these issues are putting strain on the company’s ability to stay financially stable.
In its Independent Expert Report included with the Explanatory Memorandum, advisory firm Grant Samuel warned: “There are compelling reasons for non-associated shareholders of The Star to approve each of the [Strategic Investments]. They will clearly be better off if the [Strategic Investments] proceed than if they do not.”
However, the expert went on to add that “the terms of each of the [Strategic Investments] are ‘not fair’, but the methodology required for this analysis under regulatory policy is, at best, theoretical and should not be the primary basis on which to judge the merits of the [Strategic Investments].”
If shareholders give the green light to the proposed resolutions and the full funding goes ahead, Bally’s and Investment Holdings could end up holding a controlling stake in The Star. Through the conversion of their notes, Bally’s stake could climb as high as 53.75%, while Investment Holdings might reach up to 37.33%.
The Star’s board is urging shareholders to support the transaction, warning that “there has been no alternative source of additional funding for a similar quantum available to The Star that has been capable of being implemented.” They added that rejecting the proposal could risk voluntary administration.
Chairman Anne Ward reaffirmed the board’s position, writing to shareholders: “The Directors of The Star unanimously recommend that shareholders vote in favour of the Strategic Investments Resolutions, in the absence of a superior proposal and in the absence of the Independent Expert changing its opinion.”
Featured image: Bally’s
