The Star Entertainment Group (ASX: SGR) has been thrown a $650 million lifeline by private equity group Oaktree Capital Management in a debt-refinancing proposal that could give the embattled group a breather over the next five years.

While the debt agreement is subject to government approvals and due diligence, The Star notes that it is not conditional on the company “raising subordinated capital nor any waiver or deferral of tax payable to state governments”.

Under an existing $200 million debt lifeline from lenders secured in October last year, The Star had to raise additional capital of at least $150 million to secure the second tranche of $100 million – a condition that the casino group failed to meet by the end of December last year.  

The Star also points out that it will need additional funding in the lead-up to Oaktree's proposed settlement date should a deal proceed, adding another layer of complexity to the company’s precarious financial position.

In an announcement to the ASX today, The Star says that Oaktree is willing to provide The Star with a total of $650 million in two debt facilities over a five-year term.

The proposal is still subject to “a comprehensive security package and intercreditor documentation which requires consents from NSW and Queensland Governments and regulators”.

Oaktree is also seeking due diligence on “specified matters”, adding that the company’s existing lenders must also enter a settlement and/or refinancing agreement “on terms satisfactory to Oaktree”.

The proposal follows an announcement last week that The Star was considering selling its 50 per cent interest in the $3.6 billion Queen’s Wharf development to its Hong Kong partners Chow Tai Fook Enterprises and Far East Consortium, although the pricing for such a deal remains a sticking point.

The Star says it is currently considering the proposal put forward by Oaktree, a US-based investor with more than US$202 billion ($317 billion) in assets under management.

“There is no certainty that the proposal will be progressed, that the conditions to the proposal will be satisfied, or that the proposal will be implemented,” says the company.

“If The Star proceeds with the proposal, the company will require additional funding for the period prior to the proposal being implemented."

The casino operator has previously announced it is exploring a number of potential “liquidity solutions” and today affirms that it continues to do so while warning that its future remains on a knife edge.

“While discussions continue with respect to a range of different solutions, there is no certainty that any of these discussions or negotiations will result in one or more definitive arrangements that might materially increase the group’s liquidity position,” says The Star.

“In the absence of one or more of those arrangements, there remains material uncertainty as to the group's ability to continue as a going concern.”

Shares in The Star were trading at 12.75c each, up 6 per cent, at 11.07am (AEDT).

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