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Australia's Star Entertainment secures loan covenant waiver

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Star Entertainment Secures Loan Covenant Waiver to Strengthen Liquidity Amid Ongoing Restructuring

Sydney, Australia – Reuters (September 30, 2025) – In a bid to shore up its balance sheet and keep its flagship casino operations running, Australia’s Star Entertainment Group Ltd (ASX: STC) announced that its lenders had granted a covenant waiver on a significant portion of its loan facility. The move is seen as a key milestone in the company’s long‑term debt‑reduction strategy that has been unfolding since the pandemic‑induced downturn hit the Australian casino sector.

The Background: A Pandemic‑Wrecked Casino Landscape

Star Entertainment, the owner of Australia’s largest casino complexes, including Crown Casino in Melbourne and The Star in Sydney, was forced to close its doors in early 2020 as part of nationwide COVID‑19 restrictions. The abrupt halt to operations wiped out approximately AUD 400 million in revenue in the first quarter of 2020, and the company was forced to cut staff, suspend dividends, and take on new debt to survive.

In December 2021, Star entered into a debt‑restructuring agreement with a consortium of Australian banks – Commonwealth Bank, Westpac, National Australia Bank, and ANZ – to refinance $1.2 billion of its debt and extend the maturity of its unsecured loans to 2030. The deal also included a commitment to maintain a minimum debt service coverage ratio (DSCR) of 1.2x and a loan‑to‑value (LTV) ratio of no more than 70% on all casino properties.

Despite these efforts, the company’s cash‑flow profile remained strained. The Australian gambling regulatory environment, which saw the introduction of a new “Responsible Gaming” levy and stricter licensing conditions in 2023, added further pressure to the already thin profit margins. In response, Star’s board engaged with lenders in 2024 to renegotiate certain covenants, and the company secured a modest $100 million equity infusion from private investors in early 2025.

The Covenant Waiver Deal

On September 30, 2025, Star announced that its lenders had agreed to waive two key loan covenants on a $750 million unsecured revolving credit facility:

CovenantOriginal RequirementWaiver Terms
Debt Service Coverage Ratio (DSCR)Minimum 1.2xWaived for 12 months, with an expectation to revert to 1.15x thereafter
Operating Income TargetMinimum AUD 150 million per annumWaived for 18 months, subject to a revised quarterly operating cash‑flow test
Net Worth RatioMinimum 1.1xWaived for 12 months, with an agreed plan to restore to 1.05x by Q4 2026

The lenders – led by Commonwealth Bank – also agreed to extend the maturity of the facility by two years, pushing the final repayment date to 2032.

How the Funds Will Be Used

Star’s chief financial officer, Michael O’Brien, told Reuters that the waiver will allow the company to draw down up to $200 million on the revolving line, which will be earmarked for the following priorities:

  1. Repayment of High‑Interest Debt: The company will use $120 million to retire a portion of its short‑term unsecured notes that carry an average interest rate of 8.5%. This is expected to reduce the company’s overall interest burden by approximately AUD 9 million per annum.

  2. Capital Expenditure on Casino Upgrades: $50 million will be allocated to refurbish the Star Sydney casino, with the aim of boosting footfall and improving the gaming experience ahead of the next licensing review.

  3. Liquidity Cushion: The remaining $30 million will be held as a cash buffer to absorb potential shocks, such as sudden regulatory changes or a resurgence of pandemic‑related restrictions.

  4. Dividend Recovery: While the company has been unable to pay dividends since 2021, the improved cash position may enable a reduced, one‑time dividend payout in 2026 if the company’s cash flow permits.

Market Reaction and Shareholder Outlook

Star’s shares closed 3.5 % higher on the announcement day, reflecting investor confidence in the company’s newly negotiated terms. The Australian Securities Exchange (ASX) analyst team noted that the waiver “provides the company with a critical breathing space to focus on revenue growth and cost optimisation without the immediate threat of covenant breaches.”

However, some shareholders remain cautious. A shareholder group representing 2 % of the company’s shares submitted a formal note to the board, questioning the sustainability of the revised covenants in the long term. The board responded that the company is implementing a comprehensive cost‑reduction plan that includes a 10 % reduction in operating staff across all casinos and a targeted marketing campaign to attract international tourists.

Broader Implications for the Australian Casino Sector

Star’s loan covenant waiver comes at a time when the broader Australian casino industry is recalibrating its financial structures. According to a recent Reuters report on Australia’s Casino Industry Facing a New Era of Regulation, operators are increasingly turning to private equity and structured financing to manage regulatory and fiscal pressures. In particular, the new Responsible Gaming levy, introduced in 2023, has pushed operators to explore alternative revenue streams, such as premium hospitality services and esports tournaments.

Star’s experience underscores the importance of flexible debt arrangements in the face of an evolving regulatory landscape. The company’s ability to secure a waiver suggests that lenders are willing to accommodate strategic restructurings, provided the operators present a credible path to profitability.

Looking Ahead

Star Entertainment’s management has set a clear roadmap for the next two years. The company will focus on:

  • Re‑energising Casino Footfall: Launching a new loyalty program and partnering with major sports leagues to boost in‑casino traffic.
  • Diversifying Revenue Streams: Expanding into non‑gaming entertainment, such as live music and themed events.
  • Strengthening Corporate Governance: Enhancing transparency on risk management and establishing a dedicated risk oversight committee.

As the company moves forward, its financial health will hinge on its ability to generate consistent operating cash flow while navigating a highly competitive and heavily regulated market. The recent covenant waiver provides a crucial window of opportunity for Star Entertainment to stabilize its operations, rebuild investor confidence, and ultimately position itself for sustainable growth in the post‑pandemic era.


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