Bally's Might Drop Star Entertainment Rescue Plan Due to Regulatory Risks

Bally's chairman Soo Kim emphasized that a hefty fine from Australia’s financial regulator, AUSTRAC, might jeopardize the entire dealImage Source: Shutterstock.com

The US casino company Bally’s Corporationhas expressed major worries about its planned bailout of Australia’s Star Entertainment Group. It warns it may pull out if regulators slap a big fine on Star.

Bally’s Warns $300M Star Rescue Hinges on AUSTRAC Fine Outcome

Bally’s chairman Soo Kimsaid the $300 million rescue deal, which Australian billionaire Bruce Mathiesonalso backs, depends on Star staying healthy. Kimpointed out that a steep penalty from Australia’s financial crimes watchdog, AUSTRAC, could kill the agreement, reported The Australian. AUSTRACwants to fine Starup to $400 million for its ongoing money laundering issues.

Kimtold reporters that Bally’shad looked into Star’s finances before agreeing to the deal. However, he cautioned that if courts later hand down huge fines, things could change a lot. He hinted that any fine close to Crown Resorts’ record $450 million payoutlast year might make the rescue plan impossible.

The Federal Courtwill give its verdict later this year, after claims that Star let serious rule-breaking happen at its casinos. Starhas admitted that fines over $100 million could put its survival at risk.

Star shareholdersgave the thumbs up to Bally’s rescue package after warnings that no other funding options existed. The casino operator’s chair, Anne Ward, told investors the company had no real choice but to accept the deal, which changes debt into equity.

Star’s Future in Doubt as Bally’s Deal Wavers and Queen’s Wharf Sale Falters

Even though shareholders approved the deal with Bally’s, the possible fine has thrown doubt on the whole arrangement. Bally’s, which faces its own financial troubles in the US, has been trying to cut its debt. It is now building a $2.7 billion casino in Chicagoand just agreed to sell its interactive division to Greek company Intralotfor about €2 billion ($2.4 billion)in cash and stock.

Adding to Star’s problems, its Hong Kong-based partners, Chow Tai Fook Enterprisesand Far East Consortium, want to cancel their deal to buy Star’s 50% share in Brisbane’s Queen’s Wharf project. They claim the deal does not make financial sense now. Star has until next week to save the transaction.

The Queensland government, aware of the thousands of Queen’s Wharf workers, has promised to work with all parties to protect jobs. If the Queen’s Wharf sale fails, Star might lose up to $1 billion in debt relief, money it needs to keep running.Kim notedthat he preferred that Star’s Brisbane, Sydney, and Gold Coast casinosstay under shared control. He said Bally’s would rather manage all properties as one unit to turn them around.