Public intervention by KordaMentha in $500m pub debt deal as Bain plays hard

KordaMentha has become involved in a $500m face-off between Sydney property investor Jon Adgemis and Bain Capital over the Public Hospitality Group.

Ex-banker and property investor Jon Adgemis. Picture: David Swift

Liquidation and insolvency player KordaMentha has inserted itself in a $500m face-off between Sydney deal-maker Jon Adgemis and Bain Capital, with the restructuring firm sounding out backers exposed to Public Hospitality Group as an exclusivity period ticks down.

Mr Adgemis and Bain are locked in heated negotiations over a potential deal that could result in the former KPMG rainmaker securing a roll-up of a string of different loans across Public Hospitality, his pub and hotel empire.

In an email seen by The Australian, KordaMentha partner Tim Fitzgerald sought to raise the issues around Public Hospitality with one of Mr Adgemis’s lenders.

Mr Fitzgerald told a lender that he understood refinancing attempts were stalling, noting his firm wanted to discuss with the lenders how KordaMentha could assist.

But some close to the deal see this foray by KordaMentha as interesting timing, given the links between the firm and Bain.

Bain previously mandated KordaMentha to assist in its purchase of airline Virgin, which was spearheaded by the private equity firm’s special situations unit, after its collapse in 2020.

KordaMentha is understood to be advising Bain on a number of matters. Bain’s special situations unit is running the Public deal.

A spokeswoman for KordaMentha confirmed the firm was “not engaged to advise any party in respect to PHG”, noting it had not been prompted by Bain to reach out to the pub group’s ­lenders.

KordaMentha has played a key role in several high-profile property crashes in Australia in recent years, including the public dissection of the Grocon group of companies.

But lenders to Mr Adgemis’s group are understood to continue to be supportive of the group of almost 22 properties, largely made up of pubs but also boasting six key properties including Noah’s backpacker hostel near Bondi Beach.

This comes after months of ratcheting pressure on Public Hospitality, which is seeking to complete a number of rebuilds and renovations as well as get a string of acquisitions to perform.

Public has been under stress in recent months as the group of pubs and hotels faces a growing interest bill, tougher trading conditions, as well as several major rebuilds or renovations that are yet to complete.

Mr Adgemis owns the entirety of Public Hospitality, which employs several hundred people across Sydney and Melbourne.

Sources close to the deal told The Australian the $500m refinancing, negotiated by Sydney-based private debt investment house Madigan Capital, is still in play, despite reports the deal had collapsed and been terminated.

By late on Sunday, no termination had been issued.

However, a spokesman for Bain Capital told The Australian the deal was dead, noting “PHG has not complied with the terms of the agreement and so the agreement is now at an end”.

The debt deal under consideration by Bain and Mr Adgemis would see all of Public’s operating assets as well as the underlying property assets, which are currently financed by a string of different lenders, consolidated under one scheme.

Sources indicate Bain was still seeking to hold Mr Adgemis’s Public Hospitality to an exclusivity period, amid demands for a significant upfront cash payment as security for any debt deal.

Public Hospitality’s string of current lenders sees the group paying about 12 per cent interest on its borrowing, with a small mezzanine debt component at 18 per cent or higher.

But the group is facing a cash crunch as several big projects approach completion, including the renovation of Noah’s Backpackers, which Public Hospitality snapped up for $68m.

This comes as Public Hospitality seeks to flesh out its cash flow options, with the group investing in dining options as well as fit-outs on boutique accommodation offerings at its sites, turning former hotels and pubs back into short-stay options.

Mr Adgemis has tapped a number of lenders to fund the sprawling group, with the group even floating plans of a public listing amid the rapid expansion.

Major backers of the group include technology baron Alex Waislitz’s Thorney Investment Group and Gleneagle Securities’ Lance Rosenberg.

Mr Waislitz holds an option with Public Hospitality that could see it acquire up to a 20 per cent shareholding in the group’s parent entity, the JAGA Group.

But Public Hospitality is also facing the loss of former Crown boss Peter Crinis, who left in April, around the time the company bought Maybe Group and four cocktail bars in Sydney.

Originally published as Public intervention by KordaMentha in $500m pub debt deal as Bain plays hard