Star Entertainment Group Ltd (ASX: SGR) shares remain on ice amid the company releasing more details of an unsolicited funding offer from US casino giant Bally's Corporation.
In its offer, Bally's said it was open to allowing existing shareholders to participate in a fully underwritten $250 million capital raise to save the company from administration.
The Star Entertainment board said it would consider Bally's non-binding proposal.
Let's take a look at the details.
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Star Entertainment shares still on ice amid prospect of capital raise
In a statement, Star Entertainment said Bally's had offered to fully underwrite a capital raise of at least $250 million in exchange for a minimum 50.1% stake in the company.
In a letter from Bally's chair Soo Kim to Star Entertainment chair Anne Ward, the corporation said it would be supportive of existing owners of Star Entertainment shares participating.
Star Entertainment explained:
Bally's would underwrite the entire amount of the capital raise, but would be supportive of providing The Star's existing shareholders the right to participate in a significant portion of the offering on a pro rata basis.
The offer from Bally's came after Star Entertainment announced details of a separate proposed financial rescue plan after the market close on Friday.
In the letter, Kim referred to the rescue plan and said:
While we understand the rationale for Star's recently announced transactions, we believe that our proposal offers Star and its stakeholders far greater value and operational flexibility, as well as the upside from retaining Star's current projects and other assets.
Kim said Bally's could fully underwrite the capital raise given it had US$171 million in cash and no drawings on a US$620 million revolving credit facility.
Therefore, Bally's had "ample unrestricted liquidity to complete this transaction expeditiously".
Kim said Bally's could implement a capital raise by 28 March.
But the company is also open to other ideas, with Kim stating:
To be clear, we remain very open to discussing a larger transaction depending on our discussions with respect to Star's liquidity and capital needs.
We would also be happy to explore alternative structures that would similarly preserve value for all key constituents, including regulators, creditors, equity holders and employees.
Bally's highlights global expertise at turning casinos around
Kim said Bally's could offer global expertise to help navigate Star Entertainment through its current financial difficulties while saving jobs and then eventually growing the business.
Kim said:
Bally's would partner with Star in deploying our significant operating experience in turning around casino assets and growing highly successful casino businesses globally.
Our team has successfully improved more than 20 individual property acquisitions
over 15 years in a variety of challenging circumstances, across the entire spectrum of gaming regulatory environments and market conditions.We are prepared to invest significant time and resources to work with the Company to return Star to profitability and sustainability.
It appears that Bally's has been eyeing the opportunity to buy a stake in Star Entertainment for a while.
Kim said they had "already completed substantial due diligence based on publicly available information … " and could thus deliver a binding proposal "within a short period of time".
The alternative to Bally's
Last Friday, Star Entertainment announced a proposed financial rescue plan in which it would sell its stake in Queen's Wharf in Brisbane to its joint venture (JV) partners in Hong Kong.
Star Entertainment would sell its 50% stake in the $3.6 billion asset for just $53 million.
But the deal would also release Star Entertainment from its obligation to fund an anticipated $212 million equity contribution to help refinance a debt facility expiring in December.
There is also a potential future earn-out of up to $225 million.
As part of the deal, Star Entertainment would also offload its Treasury Hotel and two car parks in Brisbane, whilst acquiring the JV partners' stake in two hotels at its Gold Coast property.
The parties are aiming to begin long-form documentation on the deal by 30 April.
Star also announced it was pursuing a $250 million bridge loan as well as a new five-year refinancing deal to refinance all of its corporate debt.
Star Entertainment shares snapshot
The ASX suspended Star Entertainment shares last week after the company missed its deadline to lodge its 1H FY25 report.
Star Entertainment shares have lost 79% of their value over the past 12 months.
The stock remains frozen at 11 cents per share.
