Embattled Australian casino operator The Star Entertainment Group has reportedly warned that a proposed A$400 million (approximately US$272 million) fine from the nation’s financial crimes watchdog, the Australian Transaction Reports and Analysis Centre (AUSTRAC), could push the company into bankruptcy. The operator has indicated that any fine exceeding A$100 million would place the company’s “ability to survive as a business in serious doubt.”

The warning was reportedly issued by Star’s representative, Steven Finch, during closing submissions to the Federal Court, amidst AUSTRAC’s ongoing anti-money laundering (AML) enforcement action. Finch argued that even an A$100 million fine would be a stretch for the company, describing it as “all the money that we have and reasonably anticipate being able to borrow.” This stark warning comes as AUSTRAC is seeking the A$400 million penalty after The Star recently secured a A$300 million (approximately US$176 million) rescue package from United States-based casino business Bally’s Corp and Australian conglomerate Investment Holdings Pty Ltd. The financial crimes watchdog notably highlighted this capital injection in its closing statements to the court.

The rescue package became a top priority for The Star Entertainment Group after a previous attempt to refinance nearly AU$1 billion in debt failed. This strategic investment will see Bally’s contribute A$200 million and Bruce Mathieson’s Investment Holdings invest A$100 million in the operator. The initial arrangement had indicated that Bally’s would invest at least A$250 million of the total amount. The Star has urged its shareholders to “unanimously recommend” the rescue package, with shareholders scheduled to vote in a general meeting on June 25.

Comparisons to Crown Resorts

In his arguments, Finch reportedly pushed back against comparisons to Crown Resorts, a larger Australian casino operator that settled for an AU$250 million fine in a similar AML case. Finch contended that, unlike Crown, which he described as “a much larger organisation,” The Star is not in the financial position to absorb such penalties without facing collapse. As cited by the Australian Financial Review (AFR) and reported by iGaming Times, Finch stated: “That penalty was agreed at a rate which would not result in the insolvency of Crown, which was a very much larger organisation. Whereas here, if one had a fine which was a small amount less than that, we say the evidence is that it would be insolvency.”

However, AUSTRAC has remained firm in its stance. In response, its representative, Simon White, reportedly countered, as cited by AFR and reported by iGaming Times, that “Unlike Crown, Star had the benefit of seeing the Bergin Inquiry… and still did nothing.” White’s comment referenced the first major AML investigation in Australia, which focused on Crown Resorts.

Recent Financial Performance and Outlook

The warning regarding the AUSTRAC fine comes amidst ongoing financial difficulties for The Star. At the end of April, the company swung to an operating loss in the third quarter. This loss was attributed to declining foot traffic, the impact of ex-Tropical Cyclone Alfred, and tighter gambling regulations. For the quarter, The Star reported a loss in earnings before interest, taxes, depreciation, and amortisation (EBITDA) of A$21 million. The operator registered revenue of A$271 million for the third quarter-a drop of 9 percent from the December quarter, and a significant 35 percent drop year-on-year.

The Star Entertainment Group’s warning to the Federal Court underscores the severe financial pressure the company is currently under due to regulatory enforcement actions and challenging market conditions. The upcoming shareholder vote on the rescue package and the Federal Court’s decision on the AUSTRAC fine will be critical in determining the future viability of the embattled casino operator.