Public Hospitality Group’s five Sydney pubs seized by administrators
A failed hotel sale has triggered the dramatic collapse of Jon Adgemis' pub empire, with lenders pulling their support and plunging the operation into administration.
A blow-up over the sale of the Empire Hotel in Annandale has triggered the collapse of Sydney pub baron Jon Adgemis’ empire.
Mr Adgemis ceded five pubs to the joint control of KordaMentha as administrators and McGrathNicol as receivers after his lenders pulled their support. This comes after they grew tired of the escalating crises surrounding Mr Adgemis, who is facing a potential $1.8bn personal bankruptcy in addition to his corporate conflagration.
KordaMentha and McGrathNicol have been circling Mr Adgemis’ empire for weeks, but made their shock move on Monday. The former KPMG dealmaker at his peak assembled 22 pubs and hotels across Sydney and Melbourne financed by private credit under his Public Hospitality Group.
Just days ago, Mr Adgemis had been promoting his vision for his remaining pubs, including the jewel in the crown Noah’s Backpackers in Bondi.
KordaMentha partners Ryan Rabbit, Jenny Nettleton, and Scott Langdon now control Public Hospitality Group. McGrathNicol partners Jonathan Henry, Damien Pasfield and Katherine Sozou have been appointed receivers and managers of five Sydney venues: the Empire Hotel in Annandale, Hotel Diplomat in Potts Point, Claridge House in Darlinghurst, The Exchange Hotel in Balmain, and South Bondi Hotel - the new name for Noah’s Backpackers - in Bondi.
Deutsche Bank and GEMI Investments were behind the push to jettison Mr Adgemis, with the two backers having funnelled $370m and $400m respectively into his ambitions.
Sources said frustrations over attempts to sell the Empire Hotel exhausted their patience. As revealed in The Australian, lenders were pushing Mr Adgemis to exit the property, however a deal with a buyer failed to complete.
KordaMentha, which was contacted for comment, advised distressed debt players Bain Capital amid negotiations with Mr Adgemis last year over funding a $500m refinancing of the pubs business.
This deal collapsed after Bain Capital tried to force the issue, including demanding Mr Adgemis come up with a cash contribution and an equity stake in the business.
McGrathNicol and Mr Henry have been intimately involved in Mr Adgemis’ recent push, overseeing a nearly $30m pot of cash set to fund the remaining renovations at his venues.
More than half this cash is already exhausted, yet some of the venues still require considerable works to return them to service.
Construction is underway at the Exchange Hotel, Claridge House, and the South Bondi Hotel but has been slow amid on-off disputes with both builders and lenders.
Mr Adgemis has been managing the construction. A company he controls funds his nearly $60,000 a month rent in a penthouse in Sydney’s Bondi owned by local fund manager Will Vicars.
The Australian Taxation Office has criticised this arrangement, warning bankruptcy trustees for Mr Adgemis they may have failed to adequately investigate his financial affairs.
McGrathNicol said it would continue to operate the Empire Hotel and the Hotel Diplomat, both currently run by Linchpin Group. Linchpin, which attracted celebrity chef George Calombaris to advise its venues, has suffered, and sacked several staff.
Linchpin boss Terry Soukoulis was contacted for comment.
McGrathNicol’s Mr Henry said it would now work with “all key stakeholders, including employees, patrons, suppliers and subcontractors to continue trading and constructing venues to maximise value”.
“We are actively pursuing options for the sales process and anticipate a high level of interest in these iconic Sydney venues,” he said.
A sales process will now kick off for the Empire Hotel and Hotel Diplomat.
Separately, WLP Restructuring warned creditors to Mr Adgemis’ nearly $1.8bn bankruptcy process it would be unable to provide a new report on his financial affairs after the intervention of the ATO on Monday.
The tax office won a bid to insert itself in the bankruptcy process, as lead petitioner, as it pursues Mr Adgemis over tax debts which may run in excess of $300m.
The ATO already has registered debts of $154m against Mr Adgemis personally, however companies he controls have outstanding tax bills too.
Mr Adgemis has attempted to head off attempts to make him bankrupt, offering creditors just 0.15c in the dollar in a deal part-funded by his mother and sister.
On Monday, WLP controlling trustee Scott Pascoe told creditors a report planned for Wednesday would not be distributed given a Federal Court case was set for October 3 to decide on Mr Adgemis’ bankruptcy.
Adding to his woes, Mr Adgemis must deliver nearly $6.7m to creditors by 5pm Tuesday under the terms of a peace deal struck over several of his companies tipped into liquidation last year by Muzinich.
However, the move by lenders to tip the remaining venues into liquidation imperils this.
Mr Adgemis was contacted for comment.
Do you know more? Contact rossd@theaustralian.com.au
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Originally published as Public Hospitality Group’s five Sydney pubs seized by administrators
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