Star Entertainment, Australia's major casino operator, faces a critical battle for survival as its financial situation deteriorates rapidly. The company is burning through cash at an alarming rate, leaving it with only a few months of liquidity. Despite arranging a debt facility, stringent conditions attached to the loan, including high interest rates and asset sales, further complicate its situation. The article highlights the company's precarious position and the challenges it faces in securing its future.
There is an adage that the sharemarket is like a casino. Taking a punt on whether our own major casino operator, Star Entertainment , will survive is therefore akin to betting on a betting shop. It should come with a warning: suitable only for the adrenaline-charged or risk-addicted – the kind of people who in their spare time enjoy driving racing cars or bungee jumping. For the board and management of Star, keeping the business afloat is a high-wire act that includes a race against time.
Star has been in survival mode for more than a year, but its prospects have continued to deteriorate to the point that it may need luck to avoid falling into the hands of administrators. Every time Star issues a financial update it feels like it couldn’t get any worse - but then it does. A stock exchange announcement on Wednesday evening conveyed that the company was burning through cash at a rate of $35 million per month and now has only $79 million left in the cash kitty - an amount that gives it only a couple of months left before it runs out. This is after it received $100 million in Dominic Lorrimer The good news is that Star has arranged a debt facility that could provide it with an additional $100 million. The bad news is that there are plenty of conditions attached to getting that money, and at this point many have not been satisfied. The creditors are acting more like pay-day lenders than the usual syndicate corporate lenders - which is unsurprising given the risk. The loans attract an interest rate of more than 13 per cent, there is plenty of security attached, and the company must raise at least $150 million in subordinated capital before the end of March and sell assets to meet the onerous conditions.Needless to say the extreme pressure to sell assets places Star in a poor negotiating position - the equivalent of a forced selle
Star Entertainment Casino Debt Financial Crisis Survival
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