Credit funds seek to catch a falling Star

afr.com:

Four months after Star Entertainment tapped equity capital markets for an $800 million shot in the arm, sharp-nosed debt investors have smelled blood and are circling the troubled casino operator.

Street Talk understands a handful of credit funds are preparing financing packages to lob at the under-siege business, amid concerns the equity raising wasn’t enough to fix the balance sheet.

It’s time for credit funds to run their ruler over Star. 

Barrenjoey Capital has been advising the company.

Star had $1.3 billion gross debt at the end of December, including $685 million in bank debt and $584 million in private placements in the United States. Its equity raising bumped down net debt from $1.1 billion to $341 million. The company has already flagged a refinancing.

But to Street Talk it sounds like credit investors are getting their ducks in a row should a broader opportunity arise. They’ve seen GenesisCare and know things can go downhill fast.

It would be interesting to see if distressed debt investment giant Oaktree Capital Management ends up playing a role if a deal does materialise at the riskier end of the scale. It held talks with the casino group this year and was understood to have discussed underwriting the equity raising, as Street Talk has previously reported.

Star is a shadow of what it used to be. Having traded as high as $5.88 in its heyday, the stock last traded at $1.14 a share. The past year, in particular, has served up a cocktail of everything that could go wrong with a gaming business. Regulators are beating at the door, taxes are up and leverage is mounting – all when customers are starting to spend less.

Star’s leverage shot up during pandemic lockdowns from 1.8-times in the 2019 financial year to a