Visitors participate in a game at Sydney's Star Casino
Visitors participate in a game at Sydney's Star Casino, February 15, 2016. Reuters

Star Entertainment Group Ltd said it was raising A$800 million ($545 million) to repay debt and suspending dividend payments, as it turned in a record statutory loss for the first half of the year amid tough business conditions in Sydney.

Regulatory restrictions on its Sydney operations from mid-September and stiff competition from bigger rival Crown Resort that started operating there in August have chipped away at profits for Star, Australia's second-biggest casino operator.

The capital raising, comprising a A$685 million 3-for-5 rights offer and a A$115 million institutional placement, will help Star repay debt and increase liquidity, the company said on Thursday. It had a net debt of A$1.11 billion as of end-2022.

The shares in the capital raising are being sold at A$1.20 each, 21% below Star's latest closing price of A$1.52.

Major shareholders Chow Tai Fook Enterprises and Far East Consortium have taken up their rights entitlements and committed $80 million to the capital raising, Star said.

For the first half of the year ended Dec. 31, Star reported a record statutory net loss after tax of A$1.26 billion, versus a loss of A$74.2 million a year earlier.

Star had earlier warned of an up to A$1.6 billion impairment charge in the first half from a proposal by the New South Wales government to raise taxes on casino poker machine operators. Sydney is the capital of the state.

"Tax resolution with New South Wales government remains the key catalyst for investors," Jefferies analysts said in a note.

The casino operator also wrote down the goodwill of its Sydney casino in the first half, from A$851 million to zero.

It said it would suspend dividend payments as it tries to reduce its debt and its casino licences were in full operation.

The firm, however, posted A$43.6 million in normalised net profit after tax, versus A$73.7 million in losses a year ago.

Star shares are in a trading halt Thursday while the capital raising is underway.

($1 = 1.4686 Australian dollars)