Star Entertainment to consider $650m debt refinancing offer from Oaktree Capital Management

Teetering casino giant Star Entertainment is considering a $650 million financial lifeline from a hard-nosed lender whose bailout deal with another big-name Queensland company ended in tears for shareholders.

ASX-listed Star runs casinos in Brisbane, the Gold Coast and Sydney, and has warned of the risk of collapse due to financial struggles.

It confirmed to the sharemarket on Monday that it received an offer to lend $650 million from California-based Oaktree Capital Management, which deals in what is known as distressed debt.

The deal is not yet sealed — it could also require Star's existing lenders to agree with Oaktree to a refinance deal that could see those older lenders take less money than is owed.

The logic for those older lenders is they would be better off getting back some money now under Oaktree's deal than if Star were to collapse.

Oaktree also would require security over assets, obtain consents from NSW and Queensland governments, and need to complete due diligence, Star told investors.

Rebranding 'vulture investment'

The head company of Star had owed a syndicate of lenders $430 million as at December, according to its latest quarterly accounts.

It had burnt through $108 million in the previous three months and had $78 million in available cash.

Star said its board would consider the Oaktree offer but warned the deal might not proceed.

Even if the offer was accepted, Star said it "will require additional funding" until the actual financial lifeline becomes reality.

It was also looking at other ways to raise cash.

Star has previously considered options including tax deferrals from state governments and selling off its stake in the joint venture that owns the Queen's Wharf casino to its controversial Chinese partners.

Oaktree is renowned for driving hard deals and has tried to lift the image of distressed debt, a term detractors nickname as being involved in "vulture" investments.

Oaktree has rebranded its offering as "opportunistic credit". 

"What hasn't changed is our investment approach: we seek to protect against loss by buying claims on assets at bargain prices, and we aim to achieve substantial gains by actively participating in restructurings to restore companies to financial viability", the company says on its website.

The ABC has contacted Oaktree for comment.

In 2018, Oaktree offered a $50 million lifeline to Brisbane-based Blue Sky Alternative Investments, a former $1 billion-plus stockmarket darling investment group whose value plunged.

The deal soured for shareholders in Blue Sky. Amid ongoing perilous finances, Oaktree pulled the plug and sent in receivers within nine months of the deal being sealed.

Blue Sky's directors complained later that they were blindsided about the insolvency appointment, saying they believed they were in "engaging in discussions" with Oaktree about the struggles and the appointment of receivers "was not expected".

Some Blue Sky assets were then transferred to a subsidiary of funds managed by Oaktree in a deal with receivers, which Oaktree said had been done on an arms-length basis.