Pubs baron Mathieson stumps up $100m as Bally’s deal puts spotlight on The Star’s Brisbane exit

While pubs baron Bruce Mathieson has emerged as a major player in the $300 million US-backed rescue deal for embattled casino operator The Star Entertainment Group (ASX: SGR), the bailout has raised questions over the fate of The Star’s planned exit from the Brisbane market announced last month.

In an announcement after the market closed yesterday, The Star confirmed that the Gold Coast-based Mathieson would stump up $100 million for the proposed convertible note and subordinated debt instrument proposed by US casino giant Bally’s Corporation, which would see the noteholders secure 56.7 per cent of The Star.

Mathieson, a former Victorian who built his fortune in the hotels industry in partnership with Woolworths (ASX: WOW) and holds a 15 per cent stake in Endeavour Group (ASX: EDV), is The Star’s largest shareholder.

Bally’s will account for the $200 million balance of the deal which is aimed at finally getting The Star get back on track after months of failed negotiations with various parties for a much-needed refinancing deal for the cash-strapped group.

The deal comes on the heels of The Star announcing a month ago that it had struck an agreement with its Hong Kong development partners to sell its 50 per cent interest in the Destination Brisbane Consortium for $53 million – a move that would eventually facilitate a complete exit of the Brisbane market by The Star.

Under that agreement, The Star will vacate the new $3.6 billion Queen’s Wharf casino as early as March next year while doubling down on the Gold Coast market where it will assume full control of the development assets it holds in partnership with Destination Brisbane’s Chow Tai Fook Enterprises and Far Eastern Consortium.

However, Bally’s Corp chairman Soo Kim has previously indicated that the US group was interested in maintaining The Star as a complete business with its operations in Brisbane, Sydney and the Gold Coast remaining intact.

"It’s still early, but in general, if something is worth doing, it’s worth doing completely," Kim told Inside Asia Gaming in an interview regarding Bally’s intentions for The Star.

"We’ve seen reports of interest in individual properties, but I’m not sure breaking them up would work. Some would flourish, but others might not. Keeping them together may actually ensure they all continue operating as casinos. That’s just an observation we had."

The Star has so far made no announcement regarding any changes to the sale agreement for Queen’s Wharf since the rescue deal with Bally’s was announced on Monday evening.

In a separate interview with Inside Asia Gaming published this morning, Kim acknowledges that the agreement to exit Queen’s Wharf has been signed by The Star, but he adds that “lots of agreements” secured by the Brisbane-based company haven’t necessarily been finalised.

“We’re just getting a handle on the entire situation,” says Kim. “We’re prepared to manage all of the assets as one group and we’re also prepared if the company does succeed in selling (The Star Brisbane) and then focusing on the two that remain.”

The Star has already received $35 million of the total cash consideration of the Queens’s Wharf exit. However, the buyout still remains subject to formal documentation by April 30.

Under the terms of the Bally’s agreement, $100 million is expected to land in The Star’s bank account by today, subject to the receipt of consents from the group’s senior lenders.

While The Star’s planned exit from Brisbane was not addressed in this week’s announcement of the rescue proposal by Bally’s and Mathieson, the issue appears to still be alive in the wake of The Star progressing with Bally’s plan.

Bally’s revealed last month that it had “unrestricted liquidity” to facilitate The Star transaction “expeditiously”. But the speed at which the deal has been struck appears to have created some confusion as the Brisbane exit remains at odds with the recent comments by the Bally’s chairman.

A spokesperson for The Star says nothing has changed in relation to the Queen’s Wharf deal. Business News Australia has sought further comment from Bally’s Corporation.

Meanwhile, The Star also announced after the market closed last night that it had completed the sale of The Star Sydney Event Centre to Foundation Theatres for $60 million.

The Star says proceeds from the transaction, totalling $58.1 million, are being held in escrow until the company secures shareholder approval for the $300 million Bally’s proposal which is expected to occur at a meeting scheduled for June.