Rewrites throughout, updates with shares, analyst comment, further details and background

By Himanshi Akhand and Rishav Chatterjee

Feb 17 (Reuters) - Star Entertainment SGR.AX announced on Monday that U.S.-based Oaktree OAKCP.UL had offered to refinance A$650 million ($413.40 million) of its debt in what could be a major lifeline for the cash-strapped firm.

Shares in the Australian casino operator jumped 8.3% to A$0.13 in Sydney following the announcement. The company's shares plummeted more than 63% in 2024.

Oaktree Capital Management's offer was first reported by the Australian Financial Review, which said the asset management firm had approached Star's lender syndicate including Westpac, Barclays and Washington H Soul Pattinson along with other investors, offering to acquire their debt at a discount.

Star said it was considering the offer but provided no assurances the proposal would be accepted.

If the proposal is accepted, it would result in the dilution of the shareholding of the casino operator's investors and make Oaktree a significant investor in the future. Oaktree was not immediately available for comment outside of business hours.

Star has been urgently seeking to raise capital after expressing doubts last month about its viability due to a cash crunch. The company needs to raise A$150 million in subordinated debt to proceed with further A$100 million borrowings.

The heavily-indebted gaming firm has been struggling amidst a crisis affecting Australian casino operators for years, with Star and larger rival Crown Resorts, owned by Blackstone BX.N, facing multiple regulatory inquiries, decreased tourist visits and long closures.

The firm has repeatedly warned investors that conditions remain challenging for the company to continue operating.

"We would caution a significant rise in the Star's share price given that its currently very public dirty laundry would likely be a considerable liability for whomever purchases control of the group," said Jesse Moors, portfolio manager at Spatium Capital.

"Oaktree will likely be cognisant and aggressive in their negotiation of this; which may dilute current or new shareholders in Star."

Star said several conditions must be met for Oaktree's offer to proceed, including a "comprehensive" security package, approvals from governments and regulators in New South Wales and Queensland, completion of due diligence and existing creditors entering a settlement and/or refinancing agreement on terms satisfactory to Oaktree.

($1 = 1.5723 Australian dollars)

(Reporting by Himanshi Akhand in Bengaluru; Editing by Sonali Paul and Jacqueline Wong)

((Himanshi.Akhand@thomsonreuters.com;))