Source : THE AGE NEWS
Embattled casino operator Star Entertainment has warned that if it is unable to find a solution to its business woes, there will be “material uncertainty” over its ability to continue operating and meeting its financial obligations.
In a quarterly update to investors on Monday, ASX-listed Star said its revenue had fallen 15 per cent in the December quarter, citing ongoing weakness in its operating performance. It pointed to a “challenging” consumer environment, the impact of carded play in NSW, and expenses caused by a series of regulatory and compliance problems.
Star is in a fight for survival.Credit: Louie Douvis
The Star reiterated that it had $78 million left in cash – after previously indicating earlier in the month that it is burning through about $35 million a month – which prompted Morningstar’s analyst to warn the company may not survive until its results in late February.
As it fights for survival, Star said it was continuing discussions to attempt to deal with the crunch on its finances, but there was no guarantee it would be able to reach a deal to resolve its situation. It acknowledged the uncertainty over its ability to continue operating if the negotiations were unsuccessful.
“While discussions continue with respect to a range of different solutions, there is no certainty that any of these negotiations will result in one or more definitive arrangements that might materially increase the Group’s liquidity position. 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,” Star said.
The update said Star made a loss of $8 million in the second quarter on an EBITDA (earnings before interest, tax, depreciation and amortisation) basis, an improvement on the $18 million loss in its first quarter.
Star shares edged down by a quarter of a cent to 13.75¢.
Star is seeking to unlock $100 million in loans that it negotiated last year to give it more time, but to do that, it needs to meet various conditions. On Monday it said: “A number of these conditions remain challenging to meet given the Group’s current circumstances.”
In particular, Star said it had “limited” capacity to raise $150 million in subordinated debt – one of the conditions for accessing the $100 million in loans.
Star has also been asking the NSW and Queensland governments for help and it could also look at selling assets – it owns casinos in Sydney, Brisbane and the Gold Coast.
In a further sign of its precarious financial situation, the company’s Monday update also reiterated that the company’s directors continued to seek external advice on application of “safe harbour” provisions of the Corporations Act. This is part of the law aimed at helping directors turn around a distressed company without being personally liable for debts incurred by an insolvent company, provided they meet certain conditions.
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