Why Keystone’s lenders pulled the plug

The restaurant owner’s fall into receivership follows a $20m loss last year and a warning to investors.

Keystone lenders called in Ferrier Hodgson’s Morgan Kelly and Ryan Eagles to take control.

Failed restaurant operator Keystone Hospitality Group, which runs some of Sydney’s top bars and eateries, was due to repay its international lenders $25 million by tomorrow.

But the company, which was until recently run by Southern Cross Austereo boss Grant Blackley, was instead yesterday pushed into receivership by its lenders, American private equity giant KKR and Singapore-based private equity outfit Olympus, which it owed almost $80m.

Accounts show the company, which is now run by investment banker and shareholder Richard Facioni, lost $20m last financial year after turning over $120m at venues that included The Cargo Bar, Jamie’s Italian restaurants, Bungalow 8 and the now sold Newtown Hotel.

Keystone had warned its investors, which include Mr Blackley, that at the middle of last year it had net liabilities of $14m and a working capital deficiency of almost $93m.

It was in breach of its debt covenants but had entered into an agreement with its lenders towards getting the business back on track.

However, yesterday those lenders called in Ferrier Hodgson’s Morgan Kelly and Ryan Eagles to take control of the business, whose venues also include Gazebo at Elizabeth Bay and Kingsleys at Woolloomooloo, where millionaire adman John Singleton last year had a physical altercation with Hungry Jacks founder and Fairfax Media board member Jack Cowin.

The Keystone accounts show Mr Facioni and fellow directors Warren Duncan and Robert Webster had agreed with the private equity giants to restructure the business, including raising an immediate $5m in fresh equity from existing shareholders and selling assets that included Bungalow 8, Cargo Bar, Kingsleys and Jamie’s Italian chain.

While the fresh equity was forthcoming, only the Newtown Hotel was sold for an undisclosed amount to the Colonial Leisure Group, controlled by the former head of Computershare and millionaire Chris Morris. Keystone had previously estimated it to be worth $9m.

The company also valued Cargo Bar and Bungalow 8, both on Sydney’s King Street Wharf, at a combined $30m and steak house Kingsleys at between $7m and $9m.

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