Tourism Adventure Group directors pitch plan for survival

A mystery family member of a director of the Nomads and Base hostels is pledging a multimillion dollar cash injection as part of a last-ditch rescue plan.

A mystery family member of a director of Tourism Adventure Group would inject more than $1.5m into the accommodation and hospitality operator as part of a last ditch bid to save it from being wound up.

The company’s directors have laid out their plan to save the embattled Nomads and Base hostel network, by exiting unprofitable leases and continuing to run the business with a reduced footprint.

Under a deed of company arrangement (DOCA) proposal put to creditors, a relative of one of four directors - Daniel Bunning, Michael Ebert, Tom Cooney or Dean Walsh - would pay $1.5m into a fund to go towards repayment of staff, the administrator and unsecured creditors.

A further payment would be made to secured creditor St. George Bank to release the bank’s security over the company’s assets.

The landlord at Nomads Brisbane claims it is owed $8.7m following the collapse of Tourism Adventure Group. Picture: Richard Walker

If the proposal is approved by creditors on Friday, control of the company will return to the directors, who are continuing to negotiate new agreements with landlords in Queensland, NSW and Victoria.

Administrator Liam Healey from Ankura is recommending that creditors accept the proposal, arguing it would deliver a higher dividend than if liquidators were appointed to wind up the company.

In a report sent to creditors ahead of Friday’s vote, he predicts that close to 140 unsecured creditors, each owed less than $2000, would recoup their debts in full if the DOCA is approved, while a dividend in the range of 0.3 cents to 1.5 cents in the dollar would be realised for those owed more than $2000.

More than 130 employees would be paid their entitlements in full, the reports says.

However if the company were to be wound up, unsecured creditors would likely be left completely out of pocket, while employees would be left chasing their unpaid entitlements through the federal government’s Fair Entitlements Guarantee (FEG) safety net scheme.

“The DOCA proposal provides the ability for the companies to continue as a going concern,” the report says.

Base Backpackers at Magnetic Island.

“Employee entitlements will be paid in full or assumed in full by the proponent where their employment is to continue. The DOCA proposal will preserve jobs.

“A number of leases and other contracts which the companies are parties to will be preserved.

“It is unlikely there will be any return to unsecured creditors of the companies in a liquidation scenario. As a result, the DOCA proposal provides for a better, timelier and more certain return to all unsecured creditors of all of the companies than liquidation of the companies.”

Tourism Adventure Group called in administrators in June in the midst of ongoing international border closures and another spike in local Covid-19 cases.

While the group received $3.1m in JobKeeper payments, in addition to other government subsidies, that wasn’t enough to sustain the business, according to Mr Bunning.

“In circumstances where our total revenues have dropped by circa 70 per cent there was very little hope for the business without a clear path out of the pandemic,” he says in an excerpt included in the administrator’s report.

“We have been pursuing a capital investor since the pandemic began and pitched it to over 40 different investors.

“There has been no investor willing to make a proposal to us without a clear understanding of when the business will return to normal trading.

“It is still not clear when borders will open and if the market will return once they do open. This is very frustrating given the different approaches taken in other countries.”

Backpackers at Noosa beach prior to the Covid-19 pandemic. Picture: Megan Slade.

St. George Bank is owed around $7.3m, including contingent liabilities such as undrawn bank guarantees, while close to 150 unsecured creditors and employees are owed around $4.7m, with the ATO and Carlton & United Breweries left most out of pocket.

A further $3.4m in deferred rent and abatements is owed to landlords, but that doesn’t include an $8.7m claim from Yamaji Australia Development - the landlord at Nomads Brisbane on Edward St in the CBD.

At its peak in 2019, Tourism Adventure Group operated 25 venues across Australia and New Zealand, employing more than 600 full-time equivalent staff and turning over $150m.

The administrators continue to trade 12 venues, while two hostels in Melbourne - Nomads St Kilda and United Backpackers on Degraves St in the CBD - have temporarily closed after administrators disclaimed their leases.

Mr Bunning, an extended member of the family that established the Bunnings hardware empire, bought into the business in 2003 and was later joined by Mr Ebert, Mr Cooney and Mr Walsh.