Star Entertainment Might Take $400M Loan from WhiteHawk Capital

Executives from California-based private credit firm WhiteHawk Capital have traveled to Australia to tour Star Entertainment’s casinos as they weigh the possibility of lending the struggling operator more than $400 million, according to local news outlet Australian Financial Review.

WhiteHawk Capital Visit Star Entertainment’s Casinos

According to the reports, WhiteHawk’s Managing Director Alex Zuckerman visited the three Star properties last week, with recently appointed Star chairman Soo Kim hosting him. Rumors are that Star aimed to ensure the private credit firm fully grasped the company’s scale and potential as it sought to secure refinancing.

Star Entertainment seems to have had a multitude of financial issues recently. Some say that they stem from numerous financial decisions, with Soo Kim saying he’s appalled by the level of mismanagement in the company. 

A deal before the end of this month is considered critical to avoid breaching the terms of Star’s existing loan with its lenders, enabling the company to concentrate on other strategic priorities. Finalizing a sale of its 50% stake in The Star Brisbane to Hong Kong partners Chow Tai Fook and Far East Enterprises, and demonstrating to regulators that it merits regaining its casino license for The Star Sydney, are crucial for the future of the company. A financial injection from WhiteHawk Capital would therefore also be quite welcome.

Star Entertainment Also Has to Deal With Legal Issues

Star Entertainment’s financial issues aren’t limited to mismanagement and bad decisions, as the company has also been in legal trouble over the past few months. Star recently secured a waiver on covenants for the December reporting period from its existing lenders, though an AFR report indicates the company may have paid up to AUD 20 million ($13.9 million) for the waivers to avoid breaching those covenants.

While a refinancing package on more favorable terms could ease such pressures, Star is still awaiting a Federal Court decision on a civil action brought by Australia’s financial crimes watchdog, AUSTRAC, over alleged anti-money laundering breaches that could result in fines in the hundreds of millions of dollars. However, by AUSTRAC’s own words, legal action against Star has been slow, although still important.

AUSTRAC CEO Brendan Thomas stated that Star has undergone significant changes since the alleged breaches occurred. He added that while he would not comment extensively on risk, questions remain about whether any risks persist. Thomas further emphasized that, according to their statement of claim, the allegations are extremely serious, asserting that the scale of criminal activity in the business was enormous and the severity of that activity was equally substantial.