Bally’s Makes Rescue Offer to Aussie-Based Star Entertainment

Providence-based Bally’s Corp has made a substantial financing offer to embattled Star Entertainment for a majority share of the gaming company.

Sinking Ship

Australia’s Star Entertainment has made a series of bad business decisions and regulatory missteps leading to its current financial predicament. The company is struggling to stay afloat after a New South Wales Independent Casino Commission investigation in 2022 resulted in a $100 million penalty for money laundering activities at its Sydney casino.

The probe found that Star had lax anti-money laundering controls in place and failed to comply with prevailing responsible gaming regulations. A separate investigation found evidence of falsifying records, which prompted the installation of a government-appointed manager since the 2022 report was issued.

Government Response

The Australian State Attorney-General at the time, Shannon Fentiman, stated, “This is a significant pecuniary penalty of $100 million, which sends a very strong message to the Star that they absolutely have to get this right, and they have to get back to suitability.”

“Essentially, this means that Star has 12 months to get their house in order If they do not want to see a 90-day suspension of their license.

“These penalties have been considered very carefully following the damning findings from the Gotterson review as well as considering the responses from Star as part of the show cause process.”

Bally’s Bailout

Star Entertainment has struggled to get its business back on course after turbulent waters have nearly capsized the ship. Liquidity is the lifeblood to effectuating that desired result and prompted the company to sell 50% of its stake in the Brisbane, Australia, Queen’s Wharf casino project to its joint venture partners and co-investors for $53 million.

Star’s C-suite also tapped U.S. hedge fund King Street Capital Management for $250 million with umbrella financing up to $940 million. However, Bally’s believes its offer of 250 million

Australian dollars (approximately $158 million US) with a return of 50.1% of Star’s shares and majority ownership would be vastly superior to a complete reboot of the business. Moreover, they noted its experience with turning around distressed companies like Star.

Bally’s Takeover Proposal

“Bally’s would partner with Star in deploying our significant operating experience in turning around casino assets and growing highly successful casino businesses globally,” Bally’s chairman Soo Kim said in a letter to Star released to the Australian Securities Exchange on Monday.

“We would also be happy to explore alternative structures that would similarly preserve value for all key constituents, including regulators, creditors, equity holders, and employees,” added Kim.

Expansion Plans

The US gaming company recently acquired a casino in the U.K. and appears to be interested in expanding its international gaming footprint. Therefore, a foothold in Australia would make sense in terms of that synergy.

However, should Star rebuff Bally’s offer, the US gaming company still has an ambitious project of winning one of New York’s three downstate casino licenses.

The Bally’s project consists of a 3.1-million-square-foot casino complex, including a 500-room hotel, in the Ferry Point Park area of the Bronx. Bally’s currently operates the city-owned golf course located on the site, and the company has included plans to relocate the course and fund a police station nearby.