Archibald Capital’s Ben Madsen backed the Jon Adgemis pub empire, then lost again
Private lender Ben Madsen faces potential bankruptcy and the loss of his $11.9m Sydney mansion after his $136m bet on pub baron Jon Adgemis spectacularly collapsed.
The end of Jon Adgemis’ run as Sydney’s favourite borrower may have cost Ben Madsen, the boss of distressed debt lender Archibald Capital, $136m and his doubly bad luck financing another Adgemis project could cost him his house.
When Adgemis lost his last five pubs, Archibald missed out on any chance to refinance the debt extended to the hospitality entrepreneur and keep its investment alive. Adgemis was made bankrupt by the tax office in October.
Madsen, of course, was not the only backer of the collapsed pubs empire across Sydney and Melbourne bankrolling the purchase and renovation of 22 venues that required total reinvention. Enough lenders believed in the dream that Adgemis racked up debts of $1.8bn.
But Madsen could face bankruptcy, the loss of his palatial Sydney home, and is staring down losses that are said to run in excess of $136m.
Archibald illustrates the risks of bottom-of-the-market lending, where investors chasing equity-like returns on debt investments get burned. The opaque nature of the private credit market makes it difficult to supervise and protect investors from losses, ASIC said in February.
Madsen was on the move the morning Adgemis ceded five pubs to KordaMentha as administrators and McGrathNicol as receivers after two influential lenders, Deutsche Bank and GEMI Investments, pulled their support.
Madsen, a former ANZ banker, had rallied around the distressed Public Hospitality Group by working to shore up a failed bankruptcy proposal by Adgemis to avert financial disaster.
Archibald needed Adgemis’ insolvency peace plan to succeed, but the Australian Taxation Office had other ideas. The ATO and the Australian Financial Security Authority, the bankruptcy regulator, defeated the entrepreneur’s 0.15c in the dollar offer to creditors.
Madsen had acted as Adgemis’ mezzanine lender, stepping in to plug the gaps between the senior-secured banks and funders. Second-tier lending is a tough place to be for any funder; the rates of return are higher but so are the risks. Mezzanine lenders take the first loss when any loan goes bad, while the senior secured lenders take first pickings.
Madsen, normally at home in the riskier end of the market, told a creditors’ meeting on August 29 how “significantly impacted” he was by the continued delays.
He told the meeting that he was trying to refinance an almost $250m debt attached to Adgemis’ empire. It was accumulating interest, and Madsen needed it refinanced “into a lower interest rate, which will give a recovery back to a large amount of capital in this”.
Madsen told the meeting his $71m facility accruing 15 per cent interest.
“There’s the ability to reset that rate down to 10 per cent,” he said.
Ben Madsen and Public Hospitality Group
Madsen, 42, had backed Adgemis’ previous attempts to stop liquidators pursuing him over five other venues seized by private lender Muzinich, by offering $6.7m in convertible notes that were supposed to settle on September 30 and pay out any remaining staff obligations.
It’s the kind of plate spinning that comes effortlessly to private market operators, where assets often trade at steep discounts due to fears they could be worthless. The potential wins? Huge.
Madsen was so close to Adgemis’ plans, he was often sighted at dinners of the publican’s inner circle.
HG Investment Capital, which raises money from Sydney’s wealthy Vietnamese community, handed over almost $10m to back another company, Orange Gaming, that both Adgemis and Madsen were directors of.
But according to BRI Ferrier liquidator Peter Krejci, the company lacked a bank account and neither books nor records existed, implying Madsen and Adgemis failed to submit any accounting for Orange Gaming’s assets or liabilities.
The failure of Orange Gaming risks the Madsens’ ownership of their five-bedroom Centennial Park home, bought in 2019 for $11.9m.
The house had been guaranteed by the businessman and his wife, Tania Madsen, as part of the deal to secure funding from HG Investment Capital which is now seeking to seize the property and bankrupt Ben Madsen.
BRI Ferrier notes HG Investment Capital “has indicated its preparedness to fund a public examination of Mr Madsen, his spouse, and other relevant parties”. That means the Archibald boss may be summoned to court for interrogation.
Madsen, who did not respond to repeated requests for an interview or comment, has kept a low profile in the wake of Mr Adgemis going broke.
Madsen cut his teeth in ANZ’s markets business under the leadership of Steve Belotti, before a stint in Hong Kong with hedge fund SC Lowy.
Archibald Capital’s plan to take over pubs group
Archibald last year even floated plans to take over parts of Adgemis’ crumbling empire, by raising $28m from investors to take over Melbourne venues the Clifton Hotel in Kew, Vine Hotel in Collingwood, Saint in St Kilda as well as Sydney pubs Oxford Tavern in Petersham, Kurrajong Hotel in Erskineville, and Town Hall Hotel in Balmain.
A key plank of Madsen’s hopes was that Adgemis would complete the sale of the Empire Hotel in Annandale, so it could lighten the debt load under which his empire was staggering. But it didn’t happen in time and the lenders were squabbling over what it was worth.
It’s likely that the secured lenders to Adgemis’ pubs will get much of their money back, despite having lent at inflated values, from the five venues presently on the market.
But second tier lenders, who backed the various companies tied up in the web of corporate entities under Public Hospitality Group, will get little to nothing.
This includes GEMI Investments, run by George Fleming and Justin Epstein.
Connections to Firmus Energy float
It’s not all bad news at Archibald. Recently, Madsen did well from the headline-making Firmus Energy $73bn deal struck with technology giant Nvidia.
Firmus is expected to list next year with Archibald as an investor following a $330m raising secured in September. In November, Firmus attracted a near $6bn valuation, meaning the private company’s share register is headed for a huge windfall. It is co-founded by Oliver Curtis, who served a one-year sentence after being convicted of insider trading at age 30.
But former colleagues say the losses hit harder than an infrequent win. “Sometimes there are massive wins but others – he’s going to have to walk away from,” one said.
Having pumped as much as $136m into Adgemis’ hospitality dream and now facing the potential of bankruptcy at the hands of HG Investment Capital, Madsen is also battling creditors from other failed forays.
This includes the fallout from the failed Wilkie Creek coal mine, which Archibald Capital had supported. Madsen and Simon Raftery’s Remagen had organised loans for Wilkie Creek of more than $150m.
The mine had been shut by US coal giant Peabody Energy in 2013 after a failed campaign to sell it. But in 2021, Archibald Capital and Remagen came up with a proposal to bring it back to life.
Wilkie Creek struggled, labouring under $304m in debts before collapsing in December 2021.
Waste management player James Hallinan and his family’s Hi-Quality Finance group has alleged the two men engaged in “misleading and deceptive conduct” when touting plans to reopen the mine spruiking its “high quality, low cost” coal.
Madsen has disputed this allegation previously.
Archibald Capital was in line for a 25 per cent performance fee for any excess internal rate of return earned from the mine over and above 7.5 per cent per annum. Yet the project ended with BRI Ferrier appointed as administrator in December 2023.
The Hallinan camp alleges Archibald booked nearly $17.7m in fees alone from the loans, plus $24.2m in repayments. Madsen has denied this.
The ATO has also hounded Archibald Capital over a $707,219 debt, unsuccessfully pursuing a wind-up application to the Federal Court in May. Archibald Capital, for its part, told the court it was “solvent” in July, with the application dismissed in September.
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Originally published as Archibald Capital’s Ben Madsen backed the Jon Adgemis pub empire, then lost again
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