When these relationships were exposed by the media, a cascade of events began, starting with numerous legal inquiries and finishing with a regulatory crackdown that has rendered the casino model uneconomic.
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The lack of adherence to checks and balances around risky and problem gamblers further added to the incentive for state governments and regulators to overhaul the casino industry.
What is left of Star is now as close to broke as any company can be outside administration.
And the US company proposing to take control of Star Entertainment and provide the finance to keep the lights on cares little for the trimmings. It is promising $300 million in finance, but it needs a return – and the runway isn’t very long.
Blackstone, the company that picked up the pieces of Star’s competitor Crown, manages more than $1 trillion in assets.
Bally’s is a relatively small operator and is betting its balance sheet on Star. It has provided Star with an initial $100 million to keep it solvent for long enough for Bally’s to get the regulatory and shareholder approvals needed to become its major shareholder.
Blackstone, which manages more than $1 trillion in assets, picked up the pieces of Crown.Credit: Bloomberg
But with Star bleeding up to $30 million in cash a month, there is no room for gradual implementation of the changes needed.
Costs will need to be stripped out of Star – and the corporate device used first almost always by companies in this situation is to cut staffing levels.
Steve McCann, chief executive at Star, has spent the past nine months cutting $100 million from the company’s cost base. There is no more low-hanging fruit.
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Kim is not about to signal his punches before he gets control of Star, so it remains to be seen if his plan involves large-scale redundancies.
Bally’s other immediate challenge is to stem the flow of customers abandoning casinos because they have an aversion to new regulations. In NSW, the introduction of carded play and gambling limits sits awkwardly with many gamblers.
While these new rules have yet to hit Queensland venues, Star has already introduced a stricter “know your customer” regime which has led to a portion of anonymity-sensitive customers deserting the company’s Gold Coast venue.
McCann believes that Star’s salvation depends on the introduction of the same regulatory restrictions across all gaming venues including pubs and clubs which have to date escaped more onerous rules.
Kim says he won’t be pushing the state governments to level the regulatory playing field. He says his company just wants a chance to get on the field and get a hold of the ball.
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