Star Casino Turnaround Man Tames Regulator and Wins Lifeline

(Bloomberg) — Star Entertainment Group Ltd.’s survival depends almost entirely on new Chief Executive Officer Steve McCann and his turnaround plan, the regulator said, adding that the biggest risk to the Australian casino operator is its precarious financial position.

The investigation followed six weeks later and found that Star had breached the terms of its license multiple times, had questionable ethics, and was unfit to run its flagship Sydney casino.

Instead, Philip Crawford, Chief Commissioner of the New South Wales Independent Casino Commission, placed the Star’s future completely in McCann’s hands just weeks after securing emergency funding for the company. “I’m pretty confident this guy can do it,” Crawford told reporters in Sydney.

The scale of McCain’s challenge was laid bare last month when he made a sobering assessment of Star’s financial health. Barely three months into the job, McCann racked up annual losses of A$1.69 billion ($1.1 billion), wrote down the value of all of Star’s casinos, and revealed the company needed more capital in a deteriorating market.

“As we stand here today, their biggest risk is to their financial stability,” Crawford said Thursday. “They’re working hard to fix it, but they’re not out of the woods yet.”

The Star’s Sydney casino has been overseen by a government-appointed manager since a regulatory investigation in 2022 found it had lax anti-money-laundering controls, allowing patrons to flout China’s capital rules And problem gamblers were encouraged. The most recent investigation revealed several additional licensing violations in Sydney, including falsification of records.

Crawford’s long-awaited response was to fine Star A $15 million and extend the government observer’s term until at least March next year. This is at least the fourth such expansion.

In response, Star said on Thursday it “looks forward to continuing our constructive engagement” with regulators in New South Wales and Queensland state, which is home to the Brisbane casino, as it is “on a viable path towards applicability.” Moving forward.”

Star shares rose as much as 18% after the regulator imposed the fine, averting the worst-case scenario of losing the license. Still, the stock is down more than 40% this year, slicing the company’s market value by about A$825 million.

Crawford said that stripping Star of its license would have unacceptable economic consequences, effectively admitting that the company was too big to fail. The entire group, including its new Brisbane gaming resort, would collapse, he said, affecting more than 9,000 employees.

“We are very motivated by our belief in the public interest,” he said. “Especially given the current economic times, taking away the license would be a very extreme act.”

McCain appears to have made a significant impact on Crawford, giving the star and her new boss more time to prove her financial and cultural integrity. In a press conference that lasted less than 25 minutes, Crawford described McCain as open, forthright, influential, intelligent, trustworthy, capable and unique.

McCann also found Star’s main rival, Crown Resorts Ltd., in similar difficulties, leading to an $8.9 billion sale to American private equity giant Blackstone Inc. Crawford said that transparency and accountability at the Star has greatly improved since McCain came to power. ,

McCann also doesn’t have any hard delivery deadlines. Crawford said if he needed more time after March next year he would keep a government observer in Sydney “for the next few months, if that’s the right answer.” “We’re trying to stay flexible.”

Given the current state of the business, Star’s immediate financial ruin includes funding day-to-day operations and repayment of the newly arranged loan with an interest rate of 13.5%. Fines may also be imposed by Australia’s financial crimes regulator for alleged breaches of anti-money laundering laws.

“They have to overcome their immediate financial crisis,” Crawford said. “But there is a way forward, a path or a runway, call it whatever you want. McCann has to get a grip on this business and really shake it up.”

(Adds Starr’s response in eighth paragraph.)

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