US casino giant Bally’s Corporation may reportedly withdraw from its AU$300 million ($195 million) rescue package to Australia’s embattled casino operator Star Entertainment Group over a potentially massive fine by Australia’s anti-money laundering watchdog. As reported by Inside Asian Gaming, Bally’s chairman Soo Kim warned that the rescue package was contingent on The Star being solvent.
AUSTRAC’s fine ‘would be a real problem’: Bally’s chairman
While The Star shareholders approved the rescue package from US giant Bally’s Corporation in a very strong consensus to avert collapse, the casino operator warned that the proposed A$400 million fine from Australian Transaction Reports and Analysis Centre (AUSTRAC), could push the company into bankruptcy. Kim said any fine by the AUSTRAC over A$450 million “would be a real problem”. He said, “One of the conditions precedent to our making the final investment and converting is that the company is solvent.”
“We obviously got a solvency opinion based on what we thought were the facts at the time our deal was announced but if those facts change dramatically then the facts change dramatically.
“We are looking forward to getting involved and converting our debt to equity, exerting the influence that we believe this company needs to turn around, but there are scenarios where we are not going to be able to do that.”
Bally’s rescue package
The A$300 million funding package comprises a multi-tranche convertible note and subordinated debt instrument, split between Bally’s Corp and Bruce Mathieson’s Investment Holdings. Bally’s will contribute A$200 million while Investment Holdings will be investing A$100 million to the Star. The deal will reportedly see Bally’s take control of 38 percent of the operator while Investment Holdings will take about 23 percent.
Amid the ongoing battles that The Star currently faces is a looming A$400 fine from AUSTRAC over money laundering breaches. The casino operator warned any fine by the AUSTRAC over A$100 million will put the company’s “ability to survive as a business is in serious doubt.” The warning was reportedly issued by Star’s representative Steven Finch during closing submissions to the Federal Court.
In April-end, The Star swung to an operating loss in the third quarter. The loss was attributed to declining foot traffic, ex-Tropical Cyclone Alfred and tighter gambling regulations. For the quarter, Star reported a loss in earnings before interest, taxes, depreciation and amortisation (EBITDA) of A$21 million. The operator registered a revenue of A$271 million for the third quarter—a drop of 9 percent from the December quarter, and a 35 percent drop year-on-year.
