Closing Bell 10th January: Catastrophe Bonds and LA Wildfires

Star Entertainment Faces Financial Crisis
Star Entertainment may be insolvent within weeks as its cash reserves dwindle, with just $79 million remaining by December 31 after burning through $107 million in three months. The casino operator, facing mounting fines and reduced patronage, has received no bailout support from NSW or Queensland governments. Morningstar estimates a 50% chance of administration, risking investor losses. The board is considering asset sales and liquidity solutions, with lenders offering $100 million contingent on raising an additional $150 million. Star has already raised $1.5 billion through equity offerings but still struggles with compliance costs, penalties, and weak trading conditions.

Mesoblast Trading Halt
Mesoblast has entered a trading halt pending a market announcement, expected by January 14 or earlier. The stock, which dropped 4% on Friday, has surged over 60% since mid-December following US regulatory approval of its first commercial product. Traders are awaiting further updates that could significantly impact its valuation and market trajectory.

Catastrophe Bonds and LA Wildfires
Wildfires in Los Angeles, with $20 billion in projected insured losses, are unlikely to impact the $80 billion catastrophe bond market significantly. Cat bonds, primarily used by insurers to hedge risks, seldom cover fire alone and instead bundle risks like hurricanes. Analysts suggest that primary insurers and reinsurance layers will absorb most losses, sparing bondholders. Despite this, cumulative natural disasters may still pose risks as thresholds are reached. Last year, the Swiss Re Global Cat Bond Index grew 17%, underscoring its profitability in the absence of significant catastrophes.