Almost a decade ago, executives at Star Entertainment described the planned construction of the Queen’s Wharf casino in Brisbane as a “gamechanger” for the city and the gambling company.
The phrasing turned out to be prescient – but not in the way Star envisaged.
A massive project cost blowout, coupled with collapsing revenues, licensing headaches and major operational disruptions caused by multiple inquiries uncovering systemic breaches of anti-money-laundering rules has pushed the casino operator to the brink of collapse.
Star has warned shareholders it spent $107m in the past three months, leaving just $79m in the bank at the end of 2024.
At that rate of cash burn, it may not survive beyond February, putting its Brisbane, Sydney and Gold Coast operations at risk, along with the jobs of its 8,000 employees.
Here’s what you need to know.
What happens next?
Star is running out of options, given it has already asked shareholders – twice – to tip in money as part of an equity raise. Those investors have lost significant sums and may well lose the lot if the casino operator falls into administration.
Omkar Joshi, the chief investment officer at Opal Capital Management, says Star could try to sell assets, or hope that a white knight investor emerges before it runs out of cash.
“Their balance sheet is pretty stretched and their earnings have been under pressure as well, so it’s a pretty difficult combination,” Joshi says.
“If no one bails them out, then they probably do end up in a scenario where the equity is worthless.”
An opportunistic buyer may be enticed by Star’s beleaguered share price, which traded to a record low of 10.5c earlier this month before a modest recovery. Its stock is worth a small fraction of the $5-plus price it once traded at.
But even at that depressed level, a buyer would need to have a plan to create a profitable business.
“It comes down to someone having a lot of confidence in turning around the business over the next few years, which is not a simple outcome,” Joshi says. “It’s definitely something that has its challenges.”
What happens if Star collapses?
An administrator would open up a sales process which could result in a new owner, or the business might be split up.
“The business wouldn’t stop operating; it’s more a matter of what the capital structure looks like and who’s actually got control of the assets,” Joshi says.
New owners would typically cut costs, although there would be a limit to job losses given the casinos would still require adequate staffing to operate.
An insolvency would be a major corporate event for Australia, similar to the collapse of Network Ten in 2017, which resulted in US media company CBS Corporation taking control of the commercial television company.
There would be particular public interest in what happens to the operations at Queen’s Wharf, which has been billed as a postcard tourism precinct for Brisbane and the city’s 2032 Olympics.
The ownership of that asset is complicated by an ownership tie-up between Star and a Chinese-backed consortium.
The United Workers Union’s casinos director, Andrew Jones, says if there are any changes to operations or ownership, the union will focus efforts on maintaining job security for members.
“The future of Star cannot be determined without addressing the real human impact of this crisis,” Jones says.
“Workers deserve clarity, stability and a commitment of preserving their jobs not just from the company but from state governments.”
The New South Wales and Queensland governments have ruled out bailing out the embattled casino operator, while pledging support for workers.
Can Star be revived?
Star could buy some time if it meets the conditions of a loan agreement that would give it access to $100m before March, but there is no evidence that facility would materially change its fortunes.
The casino operator has experienced a sharp decline in high rollers from Asia in the aftermath of a NSW inquiry that found Star facilitated hundreds of millions of dollars in banned transactions, exposing it to money laundering.
Prof Elizabeth Sheedy, a governance expert at Macquarie University, says Star has lost that illicit revenue stream and must meet the extra costs of compliance.
“It would appear that once you start operating a clean casino it’s not nearly as profitable,” Sheedy says.
“Regular gamblers are not punting as much because of the cost-of-living issue, which is also playing a role.”
Star was contacted for comment.
In its annual report, the gambling company cited “financial crime remediation activities”, a softening economy and cashless gaming reforms as contributors to its earnings uncertainty.
It also faces a looming financial penalty from the financial crimes regulator Austrac, in addition to a $15m fine issued by the NSW government casino regulator late last year.
“This all begs the question, would that necessarily be a bad thing for Australia if we had one less casino operator?” Sheedy says.
“I would have thought those employees would have no difficulty picking up work elsewhere; the hospitality industry is screaming out for experienced employees in a strong labour market.
“We have more than enough gambling opportunities in this country.”
