Star Entertainment hit with $260 million fine: Can it survive?

Star Entertainment Group Ltd (ASX: SGR) has been ordered to pay $260 million by the Federal Court for repeated widespread anti-money laundering and violations of counter-terrorism financing.

The fine comes following Star Entertainment's four-year legal battle with Australia's financial intelligence agency, AUSTRAC, which commenced in 2022. 

Star Entertainment in trading halt 

Star Entertainment paused its shares on the ASX this morning ahead of the announcement. In a note to the ASX, the company said that: 

"The Star considers that the trading halt is necessary to ensure that trading in its securities does not occur in an uninformed market, pending the release of an announcement regarding the judgment and its effect on The Star."

When will the shares start trading again?

The trading halt will be in place until Star Entertainment releases an official announcement about the judgment decision, or until the commencement of normal trading on Thursday, October 30th 2026, whichever happens first.

What does this mean for the outlook for Star Entertainment?

The penalty is lower than the $400 million AUSTRAC initially sought, and the company has been granted 19 months to pay the amount in four equal instalments, with the first payment due within 28 days.

But Star Entertainment has previously warned that a fine exceeding $100 million could force the company into liquidation. And the latest news adds to strong headwinds that the company has faced over the past few years, including previous licence suspensions, a huge decline in its share price, and other corporate restructuring challenges.

But since making the claim, Star Entertainment's business looks to have turned a corner.

Star Entertainment posted a quarterly update to the ASX on Tuesday this week, which suggests the business is successfully making an operational and financial turnaround. Star Entertainment reported an 8% increase in group revenue from the pervious quarter, to $284 million.

The company also swung to a positive group EBITDA of A$12 million for the September quarter, compared to a loss of A$13 million a year earlier and a A$9 million loss in the June quarter.

So, can the company survive the $260 million fine without going bust?

I'm optimistic that it can.

I think the latest financial turnaround, combined with the fact that the Federal Court has structured the fine to be paid over several months, gives the company time to raise capital outside of the business in order to pay the fine.

As for how shareholders take the news, we'll find out once the trading halt has ended.

Share price snapshot

Ahead of the trading halt, the shares closed on Tuesday afternoon at 13 cents each. Yesterday's afternoon's closing price represents a 24% decline for the year-to-date but around a 44% increase from 12 months ago.

The post Star Entertainment hit with $260 million fine: Can it survive? appeared first on The Motley Fool Australia.

Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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