Markets regulator ASIC has forced the embattled Star Entertainment Group to raise a $150 million provision in its accounts for possible fees and fines from its alleged non-compliance with anti-money-laundering laws at its casinos in Sydney and Queensland.
At the same time, Star issued two statements on Wednesday seeking more information on two shareholdings – one held by hotels billionaire and poker machine king, Bruce Mathieson, the other by a big US fund manager.
In a statement issued Wednesday morning, ASIC announced that Star has raised the provision “after ASIC raised concerns”
“Following a review of The Star’s financial report for the year ended 30 June 2022, ASIC raised concerns that no provision had been recorded for likely fines and penalties (despite some uncertainties as to their amount) for non-compliance by The Star with Anti-Money Laundering and Counter-Terrorism Financing laws.
“This review was completed as part of ASIC’s financial reporting surveillance program. These alleged non-compliances are the subject of an AUSTRAC investigation,” the regulator said.
ASIC said it was again reminding preparers of financial reports that consideration should be given to the need for and adequacy of provisions. ASIC also recently emphasised the importance of making adequate provisions in financial reports.
ASIC said it conducts regular reviews on a risk-basis of the financial reports of selected listed companies and other significant public interest entities to monitor compliance with the Corporations Act 2001 and accounting standards.
“Accounting standard AASB 137 Provisions, Contingent Liabilities and Contingent Assets (AASB 137) requires a provision to be made where a reliable estimate can be made of the amount of the obligation.
“Some companies may assert that no reliable estimate can be made of an obligation due to uncertainties and so no provision is required to be recorded.
AASB 137 makes it clear that ‘The use of estimates is an essential part of the preparation of financial statements and does not undermine their reliability. This is especially true in the case of provisions, which by their nature are more uncertain than most other items in the statement of financial position.
“Except in extremely rare cases, entities will be able to determine a range of possible outcomes and can therefore make an estimate of the obligation that is sufficiently reliable to use in recognising a provision.”
Star on Friday completed the $595 million institutional component of a $800m million capital raising, conducted at a deep discount, aimed in part at strengthening its balance sheet after it was fined $100 million apiece by regulators in NSW and Queensland, with a fine from AUSTRAC of an unknown amount still to come.
And on Wednesday Star confirmed that publican and hotel owner, Bruce Mathieson had built a 9.97% stake in Star. Mathieson already controls 15% of Endeavour Group, the largest owner of poker machines in Australia. There have been media reports Ord Minnett, part owned by Mathieson, had been buying Star shares in recent days.
“Bruce Lawrance Mathieson, Bruce Joseph Mathieson, and Investment Holdings Pty Ltd ATF Investment Holdings Unit Trust (A.C.N. 006 336 303) became a substantial shareholder of the Company on 27 February 2023, with relevant interests held totalling 94,952,796 ordinary shares, representing 9.97% of the voting power in the Company,” Star said on Wednesday.
The Company pointed out that its constitution, as well as certain agreements entered into with Liquor and Gaming New South Wales and the Queensland Office of Liquor and Gaming Regulation, “contain restrictions prohibiting an individual from having a voting power of more than 10% in the Company.”
“The Company may refuse to register any transfer of shares which would contravene these shareholding restrictions or require divestiture of the shares that cause an individual to exceed the shareholding restrictions.” Star warned.
Star issued a similar statement in relation to State Street Corporation, a substantial shareholder of the Company. The Substantial Holder Notice (dated February 24) states that the interests held increased from 71,116,896 to 104,289,331 ordinary shares which would represent 10.09% of the voting power in the Company.
“The Company is seeking to clarify the details in the Substantial Holder Notice, noting that settlement of any new shares to be issued as part of the placement and institutional entitlement offer announced by the Company on 23 February 2023 is expected to occur on Tuesday, 7 March 2023.
Star repeated the earlier warning about the 10% holding limit, adding that “The Company may refuse to register any transfer of shares which would contravene these shareholding restrictions or require divestiture of the shares that cause an individual to exceed the shareholding restrictions.”
This was all a bit much for investors and Star shares fell 2.37% to $1.44.
