Sydney pub baron Jon Adgemis declares bankruptcy after $1.8bn financial collapse

The pubs entrepreneur has declared he will voluntarily bankrupt himself, owing an estimated $1.8bn and leaving creditors from the ATO to secretive private lenders facing a potential wipe-out.

High-profile businessman Jon Adgemis. Picture: Liam Mendes

Sydney pubs entrepreneur Jon Adgemis will declare himself bankrupt after his financial backers withdrew their support and he readies for a legal showdown with the tax office.

Mr Adgemis will become voluntarily bankrupt rather than have the Australian Taxation Office force the issue as one of a roster of creditors owed $1.8bn by the businessman.

Mr Adgemis said he took responsibility for “the position that has been reached”.

“I am deeply disappointed that my broader vision for the group did not come to fruition, and that, despite sustained efforts, I was unable to deliver a better outcome for creditors,” he said.

At his peak, Mr Adgemis controlled at least 22 pubs and hotels in Sydney and Melbourne, assembling the empire under his Public Hospitality Group banner. His strategy of buying unloved venues in both cities and one venue in the regional NSW town of Ballina required hefty funding and extensive renovations to convert the sites into hospitality properties capable of rivalling established developers like Justin Hemmes’ Merivale.

Many of the sites are still under refurbishment. Mr Adgemis’ vision was funded by private credit lenders and anchored by valuations for the venues at a “complete” stage.

On Tuesday, his remaining five venues were handed to McGrathNicol acting as receivers after lenders acted to preserve their interests. Those were 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.

Administrators KordaMentha were also appointed over Mr Adgemis’ Public Hospitality Group operating company.

The arrival of the ATO which inserted itself as lead petitioner in a court attempt to make Mr Adgemis bankrupt complicated his attempt to broker a peace deal with creditors.

This case was due to be heard on Friday, however, with Mr Adgemis’ move to bankrupt himself, it is likely to be vacated.

In a statement Mr Adgemis said delays in processing a personal insolvency agreement he had proposed to avoid bankruptcy had triggered the expiry of a loan over the five pubs.

Mr Adgemis had proposed a deal that would have returned 0.15c in the dollar to creditors, cancelling out his $1.8bn in loans, interest and personal guarantees.

Mr Adgemis proposed the deal in a bid to avoid being made bankrupt, which would have blocked him from continuing his career in property and business.

The pub baron said it had become difficult to secure replacement funding for the venues given the delays in securing approval for the personal insolvency agreement.

Mr Adgemis’ creditors met on two occasions in Sydney to vote on his deal, but the process was derailed by the intervention of the tax office and the Australian Financial Security Authority, which alleged the pub baron’s trustees had failed to investigate his financial affairs adequately.

Mr Adgemis also faced the expiry of a $7.3m deal to convert notes on several of his other venues to fund outstanding superannuation and entitlements to nearly 800 staff of his collapsed empire.

This came after he struck a peace deal with these creditors earlier this year after American private credit lender Muzinich plunged the pub empire into crisis by seizing control of five other venues.

“The collapse of the restructuring process means that arrangements intended to benefit creditors, including employees, could not be completed,” Mr Adgemis said.

“I accept the process now in place, I accept the trustee’s appointment, and I will co-operate fully so the process can run its course.”

The tax office was thought to be owed $162m based on its correspondence with Mr Adgemis’s bankruptcy trustee WLP Restructuring. Separately, the ATO was briefed internally that his companies may owe more than $300m, with much of the debt allegedly representing fraudulent GST refunds, an allegation which Mr Adgemis has denied. Liquidators for four companies previously controlled by Mr Adgemis made the allegation in an initial assessment.

Originally published as Sydney pub baron Jon Adgemis declares bankruptcy after $1.8bn financial collapse