Why is the Star Entertainment share price frozen on Monday?

Star is betting on refinancing the business.

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Woman with her hand out, symbolising a trading halt.

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The Star Entertainment Group Ltd (ASX: SGR) share price isn't moving this morning after the casino business announced that trading in its shares was going to be halted.

This is the business that has casinos in Brisbane, Gold Coast and Sydney.

What's going on with the Star Entertainment share price?

The company announced to the ASX that a trading halt was necessary because it expects to make an announcement to the ASX about refinancing and related capital structure initiatives.

This trading halt will last until the earlier of Star announcing the capital structure initiatives or the start of trading on 27 September 2023.

How much is it aiming to raise?

According to reporting by the Australian Financial Review, Star Entertainment is expected to announce a capital raising of $750 million. It's reportedly being managed by Barrenjoey and will launch "as early as Monday".

There is also a $450 million debt package which is "backed" by Westpac Banking Corp (ASX: WBC) and Barclays.

The idea is to eliminate Star's existing loans, which are partly bank debt and partly US private placement bonds.

On top of that, this money could also fund the costs associated with Queen's Wharf in Brisbane, which is one of the main projects that the casino business is working on. The total cost is estimated by Star to be $2.9 billion.

Recent performance

The company recently announced its FY23 result, which showed normalised earnings before interest, tax, depreciation and amortisation (EBITDA) of $317 million, which was slightly above the guided range of $280 million to $310 million – this was up 35%. Profitability is key for the Star Entertainment share price.

Underlying net profit after tax (NPAT) jumped 230% to $41 million, but statutory net profit sank to a loss of $2.4 billion. The significant items included an impairment of The Star Sydney, The Star Gold Coast and Treasury ($2.17 billion), ongoing regulatory and legal costs ($595 million), debt restructuring costs ($54 million) and redundancy costs ($16 million).

The company said its primary focus is remediation steps and actions, as well as a "significant uplift" in resources in anti-money laundering, 'safer gambling' and 'risk'. It also said that there would be a refresh of the senior executive team and board, while all internal controls in NSW were replaced in an eight-month project involving 546 unique controls.

Star Entertainment share price snapshot

In the past year, the Star Entertainment share price has dropped 69% and over the last five years, it has declined 84%.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Barclays Plc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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