The Star Entertainment Group has turned down initial offers from Hong Kong-based partners, Chow Tai Fook Enterprises Limited (CTFE) and Far East Consortium International Limited (FEC), to purchase its 50% stake in The Star Brisbane integrated resort. According to the company, the proposals, which were confidential, indicative, and non-binding, did not present adequate value.

In a statement (pdf) filed with the ASX on Monday, The Star noted that its board, after extensive evaluation and consultation with external advisors, decided the offers were unsatisfactory. “After careful consideration (which has included external advice),” the company stated, “none of the proposals have provided sufficient value for The Star.”

Despite rejecting these bids, the company confirmed that discussions with CTFE and FEC are ongoing, leaving the possibility open for a potential agreement under more favorable terms. The Star is continuing to evaluate the sale of its interest in the Destination Brisbane Joint Venture (DBJV), which owns The Star Brisbane.

Financial challenges and liquidity concerns

The Star Brisbane, which held its soft opening in August 2024, has been a significant financial burden for the company, contributing AU$1.6 billion ($1 billion) in debt. Additional funding is needed for the resort’s completion, further straining The Star’s financial position. The company emphasized its need to secure liquidity solutions, acknowledging that “there is no certainty that any transaction will be concluded.”

The precarious financial state of The Star has been evident for some time, as Forbes Australia pointed out. The company has already sold several non-core assets, including the Treasury Casino building in Brisbane and The Star Sydney Event Center, in an effort to stabilize its cash flow. Even with these asset sales, The Star continues to face significant financial pressure. In its most recent filing, the company reiterated that “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.”

Negotiations with Hong Kong partners stall

Sources familiar with the ongoing negotiations revealed that CTFE and FEC had proposed acquiring The Star’s stake while also assuming control of the project’s debt, which requires refinancing this year. However, the talks have hit obstacles, particularly in determining the annual management fee The Star would receive under a long-term agreement to oversee casino operations. Given the complex regulatory framework surrounding casino licensing in Australia, the fee structure remains a crucial factor in any potential deal.

Other challenges include obtaining necessary approvals from government authorities and lenders, both of which are required for a transaction to proceed. The Hong Kong investors also hold stakes in The Star’s Gold Coast casino, adding further complexities to the negotiations. Additionally, The Star is exploring alternative options to refinance the Queen’s Wharf project should a deal with CTFE and FEC fail to materialize.

Regulatory scrutiny and market struggles

The Star’s financial struggles have been compounded by regulatory scrutiny following inquiries in New South Wales and Queensland, which exposed significant anti-money laundering breaches. These findings led to widespread executive departures and an ongoing legal case against former managers. The casino operator has also been grappling with declining revenues due to a reduction in high-roller players and increased operating costs.

In a bid to stabilize its finances, The Star has sought relief from existing lenders and government authorities. Discussions have involved potential refinancing solutions, with companies such as New York-based distressed debt investor Cerberus Capital Management and private equity firm Oaktree Capital reportedly exploring investment opportunities in The Star’s debt restructuring. The Star’s market value has plunged in recent years, Australian Financial Review underlined, with shares trading at just 11 cents, a stark contrast to their $4.20 value in 2015 when the Brisbane project was first announced.