SkyCity Entertainment Settles Long-Running Dispute with Macquarie for $NZ204 Million

Highlights:

• SkyCity Entertainment has agreed to pay $NZ204 million ($187.5 million) to Macquarie.
• The dispute emerged after SkyCity sold the car park at the New Zealand International Convention Centre to Macquarie Capital Principal Finance in 2019.
• SkyCity has reached an agreement to settle the dispute, with the payment exceeding SkyCity's initial estimation but falling below Macquarie's expectations.

Resolving the Auckland Car Park Fire Dispute

SkyCity Entertainment (ASX: SKC), the operator of casinos in New Zealand and Adelaide, has agreed to pay $NZ204 million ($187.5 million) to Macquarie to settle a prolonged dispute related to a fire at an Auckland car park. The dispute emerged after SkyCity sold the car park at the New Zealand International Convention Centre to Macquarie Capital Principal Finance in 2019, just before a significant fire damaged the site. Despite facing regulatory action in Australia for anti-money-laundering failures, SkyCity has reached an agreement to settle the dispute, with the payment exceeding SkyCity's initial estimation but falling below Macquarie's expectations.

Legal Background and Court Decision

The disagreement went to the Auckland High Court in May after failed discussions. Last month, the High Court sided with SkyCity’s interpretation of the payment amount. Deloitte, representing SkyCity, valued the car park concession at $NZ187.9 million, while KPMG, engaged by Macquarie, estimated it at $NZ240 million. The agreement covered car parks at both the SkyCity Auckland casino and NZICC, expected to run until 2048.

Broader Challenges for SkyCity Entertainment

SkyCity Entertainment, operating five casinos, faces headwinds, including Federal Court action from AUSTRAC over anti-money-laundering noncompliance. AUSTRAC alleges that the company allowed 59 suspicious patrons to circulate over $4 billion in dirty cash through its Adelaide casino. An independent review of its Adelaide gaming license is on hold due to Federal Court action. In September, the company also faced the prospect of a temporary license suspension in New Zealand for alleged breaches of harm minimization rules.

Leadership Changes and Financial Outlook

Amid these challenges, SkyCity Entertainment's CEO, Michael Ahearne, will depart in March. Despite the settlement, SkyCity's shares have fallen more than 31% in the last 12 months, reflecting the company's ongoing challenges. The settlement marks a significant step in addressing legal disputes for the casino operator as it navigates complex regulatory issues and seeks stability in a challenging business environment.

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