The Star Entertainment Group, a prominent Australian casino operator, has embarked on its second capital-raising endeavor of the year, aiming to secure A$750 million (approximately $481.43 million USD) in a bid to fortify its financial standing. This capital restructuring initiative underscores the company’s commitment to strengthening its balance sheet amid challenging market conditions.
In an announcement made on Monday, the company revealed its intention to raise funds at A60c per share, reflecting a 20% discount from the closing price of A75c recorded the previous Friday.
This capital-raising effort comprises two key components: a A$589 million 1-for-1.65 pro-rata accelerated non-renounceable entitlement offer and a A$161 million institutional placement, as outlined in an official statement.
In conjunction with the capital infusion, The Star Entertainment Group will take on an additional A$450 million in new debt, provided by Barclays and Westpac. This influx of capital will also facilitate the repayment and cancellation of existing debts as part of the comprehensive capital restructuring plan.
Earlier this year, in February, the company successfully raised A$800 million at A$1.20 per share, a notable achievement given the capital-raising initiative’s substantial growth since that time.
The Star Entertainment Group has faced several challenges in recent times, including regulatory restrictions imposed on its Sydney operations starting in mid-2022 and fierce competition from the larger Crown Resort. These factors have collectively impacted the company’s profitability, despite its position as Australia’s second-largest casino operator.
As of June 30, 2023, The Star Entertainment Group reported a significantly reduced net debt of A$596 million, marking a substantial decline from its debt levels of A$1.11 billion recorded at the conclusion of 2022.
In terms of financial performance, the casino operator posted a net profit after tax, before accounting for significant items, amounting to A$41 million for fiscal year 2023. This stands in stark contrast to the previous fiscal year, which saw a loss of A$31 million.
However, it’s important to note that The Star Entertainment Group incurred a substantial impairment charge of A$2.48 billion, excluding taxes, attributed to write-downs stemming from volatile operating conditions at its Sydney operations, as well as regulatory and legal expenses.
The capital restructuring initiative underscores the company’s commitment to shoring up its financial position and navigating the evolving landscape of the Australian casino industry. The success of this endeavor will undoubtedly have far-reaching implications for The Star Entertainment Group and its stakeholders.