Why is the Star share price crashing 20% today?

Star has raised a huge sum of money. But how much and why?

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The Star Entertainment Group Ltd (ASX: SGR) share price is back from its trading halt and is crashing deep into the red.

In morning trade, the casino and resorts operator's shares are down 20% to a new record low of 60.2 cents.

Why is the Star share price crashing?

Investors have been selling the company's shares this morning after it announced major capital structure initiatives.

According to the release, this comprises a $750 million equity raising and new $450 million debt facilities.

In respect to the equity raising, Star is raising the money via a $589 million 1 for 1.65 pro rate accelerated non-renounceable entitlement offer and a $161 million institutional placement.

This morning, the company completed the institutional component of the equity raising, bringing in a total of $565 million from investors. This was undertaken at 60 cents per new share, which represents a sizeable 20% discount from where the Star share price was trading prior to its halt.

The company is now pushing ahead with a $185 million retail entitlement offer.

As for its new debt facilities, Barclays Bank and Westpac Banking Corp (ASX: WBC) are behind that. They are providing $150 million through a four-year revolving credit facility and $300 million via a four-year underwritten term loan.

Why is Star raising funds?

The company advised that its equity raising and debt facilities are designed to provide increased financial flexibility to address known and expected liabilities over the medium term. They will also help finance the ongoing needs of the business.

Commenting on the equity raising, Star's CEO and managing director, Robbie Cooke, said:

We are pleased and appreciative of the support we have received from both our existing shareholders and new investors. The refinancing and further capital structure initiatives announced yesterday represent a key milestone in the renewal of The Star. With a strengthened balance sheet and additional flexibility, we have a strong platform from which to deliver on our renewal program and strategic priorities.

The Star share price is now down 75% over the last 12 months.

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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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