Far East, Chow Tai Fook throw Star Entertainment a A$53m lifeline

Far East Consortium International (0035) and Chow Tai Fook Enterprises will provide Australia's Star Entertainment with A$53 million (HK$260 million) in cash in a deal that includes buying a stake in a Brisbane complex, offering a lifeline that will for now keep the casino operator from falling under.

Star is selling its 50 percent stake in Brisbane's Queen's Wharf precinct to its Hong Kong partners, Far East Consortium said on Friday.

The company is due to receive the first tranche of A$35 million by the end of the day.

After the deal, Far East Consortium and Chow Tai Fook Enterprises will become the sole owner of the Brisbane venture, which has luxury hotels and restaurants and other amenities.

Star will, in turn, acquire the investors' 66.67 percent stake in the Gold Coast project in Queensland.

The deal value is below the dollar threshold to automatically require foreign purchasing approval.

However, Far East Consortium said it agreed to the deal on condition that it cleared regulatory hurdles, including consent from the Queensland state government and any required approvals under Australia's Foreign Acquisitions and Takeovers Act 1975 (Cth).

It is understood that this transaction was jointly promoted by Far East Consortium and Chow Tai Fook Enterprises, as both parties aimed to maintain the normal operation of the project. 

Since the nature of the transaction involves an asset swap with a price adjustment, the total additional investment required is approximately HK$220 million, which will be jointly paid by the two local companies, sources said, adding that the actual expenditure is relatively minimal.

Cash-strapped Star has been under immense pressure to avoid voluntary administration and is seeking critical funding to stabilize its finances. 

For years, Star and larger rival Crown Resorts, owned by Blackstone, have faced multiple inquiries into violations of anti-money laundering rules and subsequent legal actions.

Star has poured millions of dollars into compliance upgrades and new systems to restore its battered reputation and secure casino licences. Those costs and weaker consumer discretionary spending have hit the firm hard.

Earlier this week, Star said it would delay the release of its interim financial results until a rescue financing package was secured, with its shares remaining suspended from trading.

STAFF REPORTER AND REUTERS