New debt deal for Jon Adgemis’ Public Hospitality Group tempts American lenders Muzinich

Lenders are now thrashing out the final components of a debt rescue deal for Jon Adgemis’ pub group.

Ex-banker Jon Adgemis, now a wealthy property mogul pictured at his venture Oxford House in Paddington. Picture: David Swift

American private lending operator Muzinich is positioned to pick up a swath of Sydney deal-maker Jon Adgemis’s debts to Deutsche Bank after the successful sign-off of a rescue deal for his pubs group.

The pubs baron, who owns and operates 22 pubs and hotels across Sydney and Melbourne, announced on Sunday the group had secured a new debt deal across his hospitality business.

The debt deal, tipped at around $400m, rolls up a sprawling debt load spread across the pubs and hotels and will bring down servicing costs for Mr Adgemis’s Public Hospitality Group.

Public Hospitality was paying almost 12 per cent on debts across the group, with a mezzanine loan component charging up to18 per cent interest.

Mr Adgemis thanked Public Hospitality staff “for their professionalism and patience as we worked hard to stabilise Public during this challenging period”.

“Public is pleased to have reached this milestone, which means we can get on with developing our properties into world-class venues, with world-class teams, creating local institutions with legacy,” he said.

The new debt facilities will be anchored by Deutsche Bank, which steered moves to consolidate the loans across the group, with Sydney lenders GEMI Investments and Archibald Capital following in the capital structure.

The debt deal is tipped to be worth $400m. Picture. Luis Enrique Ascui

The debt facilities, which sees lenders chip in more cash across the group, will be used to fund the operating costs of Public Hospitality, as well as complete the redevelopments of several pubs and hotels including the landmark Noah’s Backpackers site in Sydney’s Bondi.

Noah’s, which Mr Adgemis purchased for $68m in June 2022, is expected to reopen in time for summer.

In addition, Public Hospitality is seeking to complete its rebuild of the Kurrajong Hotel in Erskineville, the Vine Hotel in Collingwood, and the Town Hall in Balmain.

However, it also flagged plans to divest several assets, as the group mulls spinning off several pubs into an equity fund, which would allow investors to hold a stake in hospitality and accommodation assets.

Mr Adgemis will continue to hold a stake in this equity fund, which lenders Archibald, led by Ben Madesen, hold a keen interest in.

Public Hospitality’s Melbourne assets, which include the St George in St Kilda and Puttanesca Osteria, are expected to be spun off.

Already an apartment building in Bondi, adjacent to Noah’s, and the Manor House pub in Darlinghurst have been pulled out of the group by lenders.

The equity fund’s composition is expected to be finalised by the end of the month.

The finalisation of the deal may come as a welcome reprieve for lenders GEMI, which is facing the prospect of a class action from MC Lawyers after it froze redemptions on its mortgage fund.

GEMI had funded Mr Adgemis through its Australia Pacific Mortgage fund.

GEMI executive director Justin Epstein said he was “pleased to have been able to work out a solution with PHG which didn’t involve the sale of the assets”.

Mr Epstein said GEMI looked forward “to working with Deutsche Bank, Archibald Capital and PHG.”

Muzinich, which has played a limited role in Public Hospitality’s debt battles, is positioning itself to take on more of the debt book of the hospitality business.

The US group stepped into the deal after buying the first loss position of Macquarie, which sold its remaining debts to Deutsche Bank in January.

Muzinich lent to about six assets in the Public Hospitality group. The New York-based group has now tapped Deutsche Bank, with sources indicating it made an offer to increase its exposure to the debt stack.

The new deal for Mr Adgemis’s group comes after an earlier $500m proposal with lenders Bain Capital fell over in April. Bain had demanded Mr Adgemis cover a significant upfront cash payment.

Public Hospitality previously touted an ASX-listing, raising a $40m note in early 2022 backed by rich lister Alex Waislitz’s Thorney Investment Group.

Originally published as New debt deal for Jon Adgemis’ Public Hospitality Group tempts American lenders Muzinich