Source : THE AGE NEWS
Star Entertainment isn’t yet raising the white flag on insolvency, but it needs a minor miracle and the alignment of many stakeholder planets to make it happen.
Star boss Steve McCann may be lip-syncing Gloria Gaynor’s I Will Survive, but that won’t make it happen.
The casino operator, which last week said it was burning through about $35 million in cash a month, needs money or a tax break or deferral from two state governments, who have already said they have no interest. It also needs more leeway with a consortium of lenders whose loan conditions the Star is unlikely to meet.
Star CEO Steve McCann needs alignment.Credit:
It needs its directors to sign off accounts that state the company can operate as a going concern and pay its liabilities when they fall due – which could be tantamount to an act of bravery.
Furthermore, it also has regulators and joint venture partners to convince that there is a path to recovery outside the appointment of administrators.
And if that challenge isn’t Herculean enough, it needs to achieve this in little more than a month before its coffers run dry.
The chief executive of Star, McCann is a man of many talents – not the least of which is playing poker. But not even his best poker face may be enough to pull this one out of the fire.
His pitch is to convince both the NSW and Queensland governments that their interests would be best served by keeping Star Entertainment afloat.
He will be arguing that an administrator would be disinclined to fund the casinos to keep their doors open, and that if governments want to protect the 9000 jobs at stake, they would be called on to tip in cash to do that.
McCann’s pitch will be that if the casinos’ doors closed, the tax revenue state governments receive would immediately dry up.
Of course the state governments want to protect jobs, but equally, they don’t want to be seen to be using taxpayer money to bail out casinos – particularly given Star’s previous litany of corporate misbehaviour issues.
Star also has a big sales job to do on its lenders. Their agenda is to get back as much of the money as possible. To tip more money into Star now is a risky proposition.
Lenders may feel that drawing a line under Star now and appointing an administrator minimises their downside.
Regardless of whether the next chapter of Star plays out in administration or as a barely solvent going concern, the company will probably be broken up and sold off for parts.
McCann wants to dictate its orderly break-up.
But ultimately, it will be up to the lenders to decide. Under a last-ditch rescue deal agreed to last year, the lenders can provide Star with an additional $100 million over the next month to give it some breathing space to sell assets or improve its trading position.
But it may take years before Star can return to profitability, given the enormous cost of introducing reforms including cashless play.
The argument for placing it into administration is bolstered by the potential to avoid paying a fine to the financial crimes regulator AUSTRAC over alleged breaches of the anti-money laundering and counterterrorism financing laws.
The size of this penalty has not yet been set, but Star knows that it will levy a large fine of potentially hundreds of millions of dollars.
In the event of the appointment of an administrator, AUSTRAC would likely become just another unsecured creditor that could receive nothing or cents in the dollar.
There is no business as usual at Star – McCann is spinning several plates on sticks in his attempt to keep this company from falling over.
He needs stakeholders with separate agendas to align to achieve this outcome.
He must understand the difficulty of achieving it. That said, he is being paid $10 million to do it.
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