Andrew W Scott: Soo Kim, You’re obviously a busy man, you’re always travelling from one place to another, and thank you so much for speaking to us on what is a very auspicious day for your company. You’ve just passed probity for Star Entertainment. Congratulations.
Soo Kim: Thank you. We’re very excited. It’s been a long time coming. I had to check when we actually did the deal. Initially it was back in April and we got through the shareholder vote in June. We were hoping to move quickly after that, but it has taken to November, but that’s okay and you know we are just as excited, if not more excited today than we were back in April.
AWS: Well, it’s been approximately six months. And you must be thrilled and you’ve got the green light from both NSW and Queensland regulators on the same day. Obviously Star Entertainment has the flagship property in Sydney and two other properties in Queensland on the Gold Coast and in Brisbane. Now you’ve got the green light for Bally’s to become a substantial shareholder in Star. When you convert the debt to equity, it’s my understanding you’ll end up with somewhere around the high 50s, maybe 60% of the equity in Star. Is that your understanding – that you’re going to end up with around 60% in Star?
Soo Kim: That’s correct. Although I think the way it worked out is Bruce Mathieson, who we worked with to do the deal, took a third of the exposure, so we are going to end up just shy of 40%. And I think he will end up somewhere in the mid to high 20s. So collectively we will be around two-thirds of the shares and, again, this has taken a little longer than we had hoped. But obviously we respect the process of both Queensland and NSW to go through a thorough process of checking for probity and just trying to understand the transaction, which obviously qualifies as a major change. But we weren’t idle, right? With the permission of the Chair and the Group CEO, we were able to get about a dozen of our team on the ground in August and September to really start to plan out what we would do when we got control.
We have a pretty exciting plan. And when I say I’m more excited today than I was even when we first did the deal, it’s because when we did the deal, we suspected that we had the opportunities to find savings and drive revenues, but now we know we can do so.
You know, we think that there’s potentially hundreds of millions of annualized revenues that we think we can get afterwards, and actually hundreds of millions of annualized expenses that can be taken out of the business. We think we can make a difference on both sides and we’re looking forward to doing so. Obviously we have expressed our intent to convert what is now subordinated debt into equity, hopefully before the shareholder vote on Tuesday. We’re going to start to really bring changes as quickly as we can.
AWS: Well, that was going to be my very next question for you. The regulator has now given you the green light to convert that debt to equity at your leisure, whenever you’re willing to do so. And you’re saying you want to do that as early as before the AGM on this coming Tuesday, November 25?
SK: Oh, for sure, absolutely. Look, I’m not going to say it is without risk. We have a lot of work to do. But we have confidence from having turned around as many casinos as we have, in all sorts of circumstances. That gives us the quiet belief that we can do it again here. We’ve seen nothing so far to indicate that we can’t do so. So yes, we want the upside of the equity.
AWS: You said you’ve done this kind of casino turnaround a number of times before. You’ve had the advantage of getting a dozen or so of your team on the ground in August or September as you just mentioned. So that’s great, a little bit of a head start. What’s step one for you and your team upon assuming control?
SK: Well, firstly I actually commend the group leadership who have not really spent that much time operating the business but have been dealing with all these external challenges of unwinding the DBC (Destination Brisbane Consortium), dealing with the debt, our transaction itself and so it‘s meant dealing with so many things outside the ordinary course of business. It’s taken a lot of effort for that group management team to hold things together and guide the company through that.
Obviously the company’s still in a special manager situation. There is a remediation plan that they are continuing to implement. So there’s just a lot going on at the group level, which I think we will continue. You know we’re committed to the remediation. We’re committed to the improvements that the company have done on that front and we need to complete that. But one of the first changes is, really, leadership at the property levels. I think that there’s a lot of changes that can and will be made. I think you know, and I don’t know if it’s coincidental, but obviously earlier [in the week beginning November 17] there were a number of voluntary leavers in property leadership and frankly I think that you know it’s probably in anticipation of us coming in. So I think the first step is really to make sure that we have good leadership at each of the properties. So stay tuned on that.
Obviously we need to convert [Bally’s subordinated debt to equity], and I need to join the board with my colleague George Papanier. We’ll start to make those changes. But property leadership, which really will help set the direction of the operations itself, will be the first step.
AWS: It’s pretty logical that you would want your people on the ground from early on. You’ve got experience in these kind of turnarounds and let’s be honest, Star has not covered itself in glory, much as you complimented the existing management given all of the external non-operational challenges that they’ve been facing. They haven’t had the success that say Crown for example has had in remediating and getting their license back. You mentioned some of the staff that left that Steve McCann announced in the past week, the 40 senior positions. What are your thoughts on that and do you see scope for even greater cuts there
SK: To be honest, we didn’t know all 40 of those leavers, so it’s hard for me to answer your question, or to know whether or not that’s exactly what we would have done. I’m sure there were some we would have preferred to keep if possible.
But one clarification is when you say it’s “our people.” When we go into a situation like this, you know we obviously have a team of experienced people, but they also have jobs, right? And remember our position here is of a substantial, but not the majority, shareholder. So we’re in a position to have substantial control and obviously and if Bruce [Mathieson] were to agree we’d have majority control. But our goal is to make sure the right people are in place, so it’s not necessarily our people. I mean hopefully they will consider themselves our people, but you know a lot of times when we look for leadership, we actually look from within.
Maybe there are people in the wrong places or not quite empowered correctly or just not being given the opportunity. There could be people from in country, in industry, but not part of our company yet. And so we’ll recruit those people in and there could be some people we bring to consult, or second into the company, I think in certain spaces where they can make the most difference. But our goal isn’t to just put all of our Bally employees in the company. I think there’ll be very few actually. I think the real goal here is for us to make to make sure that the kind of people we would want to work with are in the right positions. Most of the talent we find right from within the company itself actually.
AWS: So perhaps the right people is a better expression than your people. Putting aside the developments of today and this week and this month, even the rest of this year and even maybe next year, how do you see Star positioned in the longer term as an asset for your company and its position within the broader Australian tourism industry?
SK: Well, look, I think it’s a real honor and privilege to own and manage the properties, which are essentially mini-monopolies in the number one, three and five cities in Australia. And obviously, as you know, Crown has cities two and four. I mean, I’m just talking about absolute size of population, obviously. Every city believes that they’re number one, right?
But in terms of being able to own or manage the properties in the most significant cities in the country, I think it’s a fantastic opportunity. I think it is analogous to in America where this year we have a similar situation as we are in the process of building the only casino in the city of Chicago, which is the third city in our country. So I think it’s a wonderful opportunity for us to do what we have done across casinos in the past and bring that same excitement and those skills to bear on a large and meaningful situation.
AWS: Two more questions for you. First of all, there’s been the on-again, off-again deal with the Hong Kong partners around the 50% stake in Brisbane. I know when we spoke some time ago, your initial preference was to try to keep all of the assets together for all three locations: Gold Coast, Brisbane and Sydney. In Brisbane you’ve got the two Hong Kong partners, Far East Consortium and Chow Tai Fook. Apparently the deal to sell Star’s 50% equity in Brisbane to them seems to be back on again. Are you disappointed about that, or do you see that as necessary for the company to move forward?
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SK: Well, look, a deal is a deal. This is the deal that the company did and you know ultimately we support, but the most important thing from my perspective is that the DBC (Destination Brisbane Consortium) partners have a good experience, right? We have a really important responsibility even though ownership is in the process of changing hands. As per the deal, as you know, we are managing the property today and we hope to manage it for the foreseeable future.
And look, they have every right to be disappointed in the company, because, frankly, Star has not done a great job operating their assets, much in the same way it hasn’t done really a great job operating any of its assets.
So our primary focus is not ownership but it’s to make sure that they have a good experience. We are excited to own and manage the Sydney property and the Gold Coast property, but we are equally excited to manage the Brisbane property and deliver for the Hong Kong partners the results that they frankly expected and deserve versus what they’ve gotten to date. So I think that’s going to be the focus. And if we do a great job for them, why would they change?
I’m going to respect the deal that was cut before I was in control, we respect the commitments of the company, but the only thing that I’ve asked of them is to give us a chance. What I have said to them is, I know that you’ve been disappointed by this company, please don’t hold those sins against us because we are not them [the former management]. Give us a chance to do a good job on these beautiful assets. I know what the ultimate plan for the properties and integrated resorts are and it’s fantastic. We just now have to make that happen.
AWS: It’s interesting to hear you say of the DBC partners that they have a right to be disappointed. That’s a different type of language from what we’ve previously heard and it’s quite refreshing to hear you say that in such stark terms compared to the previous Star managements, who continually tried to defend the positions of the past. It seems like you’re not going to take that stance of defending the indefensible.
Last question, what is your message to the thousands of staff of the Star Entertainment Group, and the people of Sydney, the Gold Coast and Brisbane, all of whom may quite rightly be feeling disillusioned with the events of previous years. What is your message to those people?
SK: I think that it’s actually similar to what I just said about the DBC folks, which is you have every right to be disappointed about what has happened and recurred in the past. But we just ask that you have an open mind, give us a chance and have some faith that we know what we’re doing. I’m more than confident that we’ll get there.
And for the [Star Entertainment] team I’m sure you’ve suffered and nobody wants to be part of a team that’s losing on the field, it’s not a pleasant experience, but again we appreciate the work of everyone on the ground; all the associates that have kept the company going.
What we plan to do is bring change and a fresh perspective. You can have confidence that we know what we’re doing and we will bring experience and we will bring our reputation for integrity, which I think is important. You can’t fix a problem until you admit there is a problem. I think we start by saying that there is. We are not happy with the results on the field, and we need to work as a team together to change them. This is not a situation where we’re presenting ourselves as some kind of saviour. That’s not how it works. We’re going to try to provide as much leadership as we can and ultimately an umbrella so that people can feel empowered, and ask for responsibility and to be held accountable. What else can you ask for in life? So that’s our job to do and to use our credibility to do that.
You know, on behalf of this company, and I think you know this, this company, if it were sort of humanized, has lost credibility and I think that’s the greatest opportunity for us to say, hey guys, we’re not denying the past. We see the problems as well, but give us a chance. And we are more than happy to be held accountable for what we do from this point.
AWS: Well, it’s very refreshing that you’ve made yourself available to communicate in this way. We’ve had some unusual interviews in airports and now you’re in a car driving in New York. But despite being busy and always moving from place to place you’ve made yourself available to speak to the stakeholders in a public forum like this. The previous management didn’t do that and I think having that open line of communication will go a long way, because people just want to be understood and listened to, and to know what is going on. So on behalf of the audience of IAG, thank you. We really appreciate you making yourself available in that way and we wish you all the best. Hopefully Bally’s coming to Star will make a huge difference and the company can move forward and get back to some of its former glories.
SK: Andrew, I appreciate the forum. I guess you’re right, every time you catch me, I am moving somewhere but I think the key is to always move forward, right? And we’re excited – as you can see we’re putting our money where our mouth is. We don’t deny there are a lot of problems, but we are so confident that we can fix these, we put our own capital on the line, and at the first opportunity that we have to convert from debt to equity, we will take it. We want the ability to both influence the outcomes and own the results. So I think the best days are ahead.
