(Bloomberg) -- Star Entertainment Group Ltd. staved off imminent collapse after the struggling Australian casino operator struck a last-minute deal to sell its stake in its new Brisbane complex to its Hong Kong tycoon partners.
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Chow Tai Fook Enterprises Ltd. and Far East Consortium Enterprises Ltd. will pay A$53 million ($33.4 million) for Star’s stake in the Brisbane project, Far East said in a statement. The first payment of A$35 million will be made Friday.
The deal injects immediate funds into Star’s near-empty accounts, and also relieves the company of further cost blowouts at the multibillion dollar resort on Australia’s east coast. Still, at the rate Star is burning through cash, the agreement gives Star Chief Executive Officer Steve McCann only a few months to arrange a more permanent fix, or face the prospect of going into administration.
Earnings remain under pressure from a cost-of-living crisis and analysts expect Star to lose money for years in its current state. There’s also a looming penalty from Australia’s financial crimes regulator — the fine could be in the region of A$330 million, according to some analysts —- for alleged breaches of anti-money laundering laws.
Even with the temporary funds in place, it’s been a stunning fall from grace for Star. It once held a casino monopoly in Australia’s biggest city, with the glitzy harborside complex opening in 1997. Almost A$4 billion has been wiped from Star’s market capitalization since late 2021, leaving the company valued at just A$316 million.
The stock has been suspended from trading this week after Star was unable to sign off and lodge its first-half results by the Feb. 28 deadline.
Star’s troubles started in October 2021, when the Sydney Morning Herald reported Star had enabled suspected money laundering, organized crime and fraud at its casinos for years. Since then, regulatory inquiries have found it unsuitable to operate its Sydney and Queensland casinos, placing them under government supervision.
The company’s woes are all the more startling given its former dominance in a country that loses more money gambling per capita than any other in the world. Gambling losses in Australia grew 14% to A$31.5 billion in the year ended June 2023, according to the most recent government data available — equal to more than A$1,500 per person.
Chow Tai Fook Enterprises is the private investment arm of Hong Kong billionaire Henry Cheng’s family. The family has an interest in SJM Holdings Ltd., one of Macau’s six casino operators, and has also invested in a casino resort in Vietnam.
The Cheng family has been in the center of a succession saga, after the senior Cheng said he’s still looking for a replacement. His eldest son Adrian, who was once seen as the strongest candidate, last year stepped down as CEO of the family’s flagship New World Development Co. after the company racked up some of the highest debt among major Hong Kong property developers.
(Updates with details on Chow Tai Fook Enterprises from the ninth paragraph.)
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