In troubled Australian casino firm Star Entertainment, asset sales are underway to generate cash, with at least one investment manager considering buying the company's debt. 

In a filing made on Wednesday with the Australian Securities Exchange (ASX), Star revealed that it is selling The Star Sydney Event Centre and associated assets to Foundation Theatres for $37.5 million (AU$60 million). That might give Star some time to prevent insolvency. Earlier this month, Morningstar analyst Angus Hewitt suggested that at its existing burn rate, the casino operator might exhaust its cash and face insolvency before releasing financial results in February.

"The Star has worked closely with the team at Foundation Theatres since they acquired the sublease for the Sydney Lyric in 2011. We are pleased to partner with them as part of the continued evolution of our broad entertainment offerings at The Star Sydney,” said Star CEO McCann in the regulatory filing.

McCann noted that the operator is involved in additional "noncore" transactions, although he did not provide details. 

Cerberus Might Seek Share of Star Debt 

Reports of the sale of the Sydney event center surfaced the day after it was revealed that Cerberus Capital Management is in discussions with Star lenders regarding the purchase of part of the AU$400 million debt owed by the gaming firm. 

The gossip suggests that the creditors, including Barclays, Deutsche Bank, Soul Pattinson, and Westpac, among others, lack faith that Star can turn its situation around, nor do they think that asset sales will suffice to sustain the company. Thus, they might be tempted to sell the gaming firm’s debt for a fraction of its worth before it becomes worthless. 

The Australian Financial Review mentioned that Cerberus Capital, located in New York, has reached out to creditors regarding the purchase of Star liabilities, although the investment firm hasn’t officially acknowledged these approaches. 

Cerberus is an alternative asset manager overseeing $65 billion in capital across the credit, private equity, and real estate sectors. The organization possesses two branches in Sydney. 

What's Ahead for Star Asset Sales 

Regarding noncore asset sales that Star might pursue to generate funds and prolong its viability, the Gold Coast Convention and Exhibition Centre (GCCEC) in Broadbeach could be suitable as it is not a gaming facility. Nonetheless, recovering the AU$167 million invested in constructing the property might be challenging as potential buyers could hold an advantage over the seller. 

Regarding the sale of gaming venues — which Star hasn't indicated it will pursue — that might be a more challenging endeavor because The Star Sydney has been managed by the Australian government since 2022, and Star could forfeit complete control of that integrated resort. 

Similarly, The Star Brisbane and The Star Gold Coast are operated by the government, suggesting that prospective buyers may encounter regulatory complexities, rendering transactions less attractive.