Star and Bally’s roll the dice on new investment plan with a change
Star Entertainment’s latest update has revealed that its largest individual shareholder Bruce Mathieson’s Investment Holdings has agreed to invest A$100 million in the operator, leading to a reduction in Bally’s contribution to A$200 million. Previously, the arrangement was that Bally’s would invest at least A$250 million of the total amount.
In early March, Star received an unsolicited bid from Bally’s offering to inject the capital in exchange for a 50.1 percent stake in the company. Under the deal, Bally’s said it was willing to convert its offer into subordinated convertible notes. These notes would eventually convert into a 50.1 percent majority stake in Star.
Deal structured in two tranches
The latest agreement is structured in two tranches. The first tranche, totaling A$100 million, is made up of subordinated debt and two distinct series of convertible notes, namely Tranche 1A Notes and Tranche 1B Notes. The second tranche, accounting for the remaining A$200 million, is contingent on several factors, including shareholder approval and regulatory clearances.
Terms of the investment include a fixed 9 percent annual interest rate, payable quarterly. Whereas the notes will be convertible at a price of A$0.08 per share, subject to customary adjustments. Tranche 1 is subdivided into several instruments: A$22.3 million in Tranche 1A Notes, A$11.1 million in Tranche 1B Notes, and A$66.6 million in subordinated debt. These instruments are unsecured, meaning they are not backed by any collateral. While the second tranche of A$200 million is still contingent on a series of approvals.
Board and divestment update
One of the key elements of the deal involves substantial changes in Star’s board composition. As part of the investment agreement, both Mathieson and Kim will be appointed as board observers. Following shareholder approval, David Curry and Con Nikitas are expected to take on operational roles at Star, subject to regulatory checks. Moreover, if the notes convert into equity, it is likely that Bally’s, along with Mathieson’s Investment Holdings, will have a controlling presence on Star’s board.
In an update to Star’s shares being suspended from trading on the public markets, the company is in process of completing its financial statements for the six-months ending 31 December. Star aims to submit the finalised accounts to the Australian Securities Exchange (ASX) shortly. The ASX had suspended Star’s shares after the operator failed to lodge its half-yearly earnings report on 28 February.
In another update, the operator announced the completion of divestment of its Sydney Event Centre and surrounding spaces to Foundation Theatres for A$60 million. This sale is part of Star’s broader strategy to streamline its operations and focus on core business activities. The funds from the sale were held in escrow but have now been released following approval from the New South Wales Independent Casino Commission (NICC).
However, NICC has imposed a condition that a portion of the proceeds (A$58.1 million) is still being held until shareholder approval for the A$300 million strategic investment is granted. The statement added, “If shareholder approval is not obtained, then The Star may request the release of the amounts in escrow subject to the Group’s satisfaction of certain financial viability conditions.”
