Chanticleer
Desperate Star’s kitchen sink equity raising is deja vu all over again
Robbie Cooke insists his fresh $750 million raising sets Star up for the future. But investors have heard it all before.
Robbie Cooke, chief executive of stricken casino giant Star Entertainment, sounds a little like a punter on a particularly bad losing streak – the $750 million equity raising he announced late on Monday afternoon after the deal was revealed a day earlier by Street Talk is absolutely, definitely, positively, the last time he’ll need to go cap in hand to investors.
“Today’s announcement is a key milestone in the renewal of The Star,” he declared. “With an optimised capital structure, strengthened balance sheet and enhanced flexibility, we have a strong platform from which to deliver on our renewal program and strategic priorities.”
Star Entertainment boss Robbie Cooke has tapped investors for the second time in seven months. David Rowe
But there’s just one problem – investors have heard all this before, and only seven months ago.
Remarkably, it was only in February that Cooke raised $800 million in equity. And back then, Cooke was singing from an eerily similar hymn sheet, declaring that raising had reset the group’s “gearing at the right level, it delivers the right level of liquidity for the business, and right-sizes our balance sheet for where I think the business needs to go”.
“There is never an absolute right number, but I don’t believe it’s too high. I don’t believe it’s too low,” Cooke said back in February. “There is an element of conservatism in this definitely, but positions the business for the next three years.”
Clearly not.
Chanticleer struggles to think of another ASX 200 company that has been forced to undertake two major equity recapitalisations so close together, but that demonstrates how desperate Cooke is to buy some breathing space.
This bargain-basement raising – it will be completed at just 60¢ a share, compared with the $1.20 a share price of February’s raising – is designed to give Star four years of runway.
First, the equity raising and accompanying $450 million debt deal from Westpac and Barclays will allow Star to repay $668 million of existing debt, with its new loan not beginning to mature until the second half of calendar 2027.
Second, it ensures there’s cash for the various penalties and settlements still coming Star’s way, from the likes of AUSTRAC, shareholder class action, unpaid state government casino duties, fines from state gambling regulators and the little matter of paying for managers to run its casinos.
Third, it allows Star to pay for its contribution to developments already underway at its Brisbane and Gold Coast casinos.
And finally, it gives Cooke a bit of spare cash for working capital, investment, higher compliance costs and increased NSW casino duties.
This is kitchen sink stuff. But then again, that was what Star said back in February.
The problem for Cooke is that he’s trying to pull off this turnaround against a difficult operational backdrop. A trading update released on Monday suggested July and August trading conditions have stabilised, but at levels seen late in the 2023 financial year, when deteriorating economic conditions, increased competition from Crown Resorts in Sydney and compliance challenges combined to hit revenue hard.
Cooke slashed $100 million in costs and 500 jobs since then, announced asset sales and was thought to be looking for a debt deal. But the rock-bottom equity raising underscores that something much more drastic was required to give this company a puncher’s chance at a turnaround.
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