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Read Full BioHong Kong investors have threatened to “walk away completely” from Star Entertainment’s Queen’s Wharf casino development in Brisbane.
Star Entertainment currently owns a 50% share of the Brisbane luxury casino complex, which became partly operational last year. Hong Kong investors holding the other 50%.
Chow Tai Fook Enterprises and Far East Consortium (FEC) both own a 25% share in the project. They agreed in March this year to buy out the Star’s stake.
However, the investors are threatening to back out of that deal due to “commercial issues”. Wendy Chiu, joint managing director of Far East Consortium, said, “There are some different interpretations between Star and Chow Tai Fook and FEC.
“Honestly, the commercial terms have to add up, especially given this environment. It hasn’t been finalized, and there are some risks, so we are taking our time, and if it doesn’t work, we’ll go back to our original stake of 25 percent.”
As reported by Reuters, Far East said in a separate statement on Monday that Star must repay A$10 million ($6.5 million) or forfeit its remaining third stake in its Gold Coast casino within 30 days of the Brisbane deal being terminated.
Bally’s Takeover Of Star Approved By Shareholders
The Star made a deal with the investment groups amid mounting financial troubles. The company subsequently agreed to a rescue package deal backed by Bally’s, the US casino operator, and Bruce Mathieson’s Investment Holdings.
On June 25, 98% of shareholders voted in favor of the proposal. It will see Bally’s invest AU$200 million ($130 million) for around 38% of the company. Bruce Mathieson’s Investment Holdings is putting up AU$100 million ($65 million) for a reported 23% stake.
Combined, Bally’s and the Mathieson group will own a controlling stake in the Star. As reported in Sigma World, The Star’s chair, Anne Ward, urged shareholders to vote in favor of the deal.
“The Star and its advisors have pursued a range of funding options with an increasing degree of urgency over the last 12 months, including asset sales and a variety of recapitalization proposals,” Ward said. “But as the independent expert said, the Star and its advisors have essentially exhausted all options. The strategic investments are the only remaining funding solution available”.
The Queen’s Wharf project is reported to have incurred AU$1.6 billion ($1 billion) of debt. The withdrawal of the Hong Kong investment groups could put the company back into financial difficulty.
Star AML Failures Cause Financial Troubles
The COVID-19 pandemic hit the Star and other casino operators in Australia hard. The industry has struggled to recover since. Star Entertainment Group reported losses of nearly AU$200 million in 2020. That was due largely to the closure of its Sydney casino for over 100 days.
The company has also faced legal scrutiny over the past few years for its failure to implement anti-money laundering measures.
In October 2022, the New South Wales Independent Casino Commission fined Star AU$100 million ($65 million). The commission found it “unsuitable” to hold its Sydney license due to serious anti‑money laundering failures.
Queensland regulators also deemed Star unfit and imposed another AU$100 million fine in December 2022. It also warned of a possible license suspension.
Former executives of the company have been under federal investigation for their involvement in allowing money laundering in the Star’s casinos.
Chief Casino Officer Gregory Hawkins and former CFO Harry Theodore were fined AU$180,000 ($118,000) and AU$60,000 ($39,000), respectively, in February this year. The pair have also been disqualified from managing companies due to misleading conduct and failing to follow AML rules.
Australian Transaction Reports and Analysis Centre (AUSTRAC), Australia’s financial crime watchdog, is also seeking an AU$400 million ($263 million) penalty in relation to the compliance failures that are said to have taken place between 2016-2022.
Last month, the operator said a penalty greater than $100 million would force it into insolvency. However, AUSTRAC pointed to the imminent injection of cash by Bally’s and the Mathieson group as proof it can pay more.
The takeover from Bally’s and Mathieson looked to have rescued the company. However, the news that the Hong Kong investors are set to walk away led to the Star’s share price falling by almost 7%.
It remains to be seen whether differences can be resolved in time to preserve the deal. Time will also tell whether AUSTRAC will press ahead in seeking the maximum penalty for the company.
