Star Entertainment Selling Assets as Cerberus Eyes Debt

Posted on: January 28, 2025, 09:04h. 

Last updated on: January 29, 2025, 09:58h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Embattled Australian casino operator Star Entertainment is selling assets to raise cash as at least one money manager is eyeing purchases of the gaming company’s debt.

The Star sign outside the Star Entertainment casino in NSW
The Star sign outside the Star Entertainment casino in New South Wales. The operator sold a theater in Sydney to raise cash to stave off insolvency. (Image: The Australian)

In a Wednesday filing with the Australian Securities Exchange (ASX), Star announced that it’s selling The Star Sydney Event Centre and related assets to Foundation Theatres for $37.5 million (AU$60 million). That could provide Star with some time to ward off insolvency. Earlier this month, Morningstar analyst Angus Hewitt speculated that at its current burn rate, the casino operator could run out of cash and become insolvent before it delivers financial results in February.

The Star has worked closely with the team at Foundation Theatres since they acquired the sublease for the Sydney Lyric in 2011. We are pleased to partner with them as part of the continued evolution of our broad entertainment offerings at The Star Sydney,” said Star CEO McCann in the regulatory filing.

McCann added that the operator is working on other “noncore” transactions, but he didn’t go into specifics.

Cerberus Could Want Piece of Star Debt

News of the Sydney event center sale emerged a day after it was reported that Cerberus Capital Management is talking with Star lenders about acquiring some of the AU$400 million in debt owed by the gaming company.

The rumor mill indicates those creditors, which include Barclays, Deutsche Bank, Soul Pattts, and Westpac, among others, have little confidence Star can right its ship, nor do they believe asset sales will be enough to keep the company afloat. So they could be inclined to sell the gaming company’s debt for pennies on the dollar before it loses all value.

The Australian Financial Review reported that New York-based Cerberus Capital has been contacting those creditors about buying Star liabilities, but the money manager hasn’t publicly confirmed those overtures.

Cerberus is an alternative asset manager with $65 billion in capital under management across the credit, private equity, and real estate spaces. The company has two offices in Sydney.

What’s Next for Star Asset Sales

In terms of noncore asset sales Star could undertake to raise cash and extend its lifespan, the Gold Coast Convention and Exhibition Centre (GCCEC) in Broadbeach could fit the bill because it’s not a gaming venue. However, recouping the AU$167 million spent to build the property could be difficult because prospective buyers would have leverage over the seller.

As for selling gaming venues — something Star hasn’t yet said it will do — that could be a tougher task because The Star Sydney has been run by the Australian government since 2022, and Star could lose full control of that integrated resort.

Likewise, The Star Brisbane and the Star Gold Coast, are also run by the government, implying there are potential regulatory complexities that potential suitors could face, making transactions unappealing.