Hospitality group behind Heartbreaker facing turmoil over $1.5m debt pile

A premier Melbourne hospitality group, who are behind bars including Heartbreaker and The Everleigh, has been hit with financial pain after one of its venues was caught up in a $1.5m debt pile.

One of Melbourne’s premier hospitality groups, whose stable of venues includes Heartbreaker and The Everleigh, has been hit with financial strife after one of its establishments was caught up in a $1.5m debt pile.

The Everleigh Group, which also takes in Bar Margaux and Connie’s Italian Diner, has struck a deal with creditors to allow its key venue Heartbreaker to keep trading after it collapsed into insolvency.

Heartbreaker, which opened in 2015, is a late-night bar known for its rock ‘n’ roll atmosphere on Russell St in Melbourne’s CBD.

Corporate records show it was quietly put into voluntary administration by its owners, Melbourne hospitality veterans Michael and Zara Madrusan, in October.

Heartbreaker is a late-night bar known for its rock ‘n’ roll atmosphere. Picture: Kiel Egging.

Heartbreaker entered insolvency with debts of just under $1.5m, including up to $171,909 owed to employees for leave and redundancy entitlements, a new report by Dye & Co administrator Adrian Warry reveals.

More than $400,000 is owed to unsecured creditors, including $171,295 to ANZ, $84,373 to system software business Square and $42,776 to non-bank lender Pepper.

An additional $591,312 is owed to other creditors including $476,542 to the Australian Taxation Office and $49,839 to the Victorian State Revenue Office.

In a deal to keep Heartbreaker afloat, Mr and Ms Madrusan will throw in $410,000 – an initial payment of $50,000 followed by monthly payments of $20,000 – to settle all creditor claims.

The Everleigh Group also takes in Bar Margaux in Melbourne’s CBD.

All outstanding employee entitlements will be paid, while unsecured creditors such as suppliers will get 26 cents on the dollar.

The Dye & Co report into the Heartbreaker collapse shows it was profitable but it came under pressure after making loans to other businesses in The Everleigh Group which they can’t pay back.

“It appears that the company profits generated by the company have been used to fund the operations of other entities within the group which has placed significant financial strain on the business despite it trading profitably,” Mr Warry said.

He said a number of entities within the hospitality group had faced financial stress in the past six months including Bar Margaux, Navy Strength Ice and The Everleigh.

All three ventures have had restructuring practitioners appointed.

A restructuring practitioner usually plays a supervisory role, assisting directors in developing a restructuring plan while the business continues to trade.

Melbourne hospitality veterans Michael and Zara Madrusan. Picture: Jay Town

The Everleigh, a cocktail bar in Fitzroy, made the highly coveted World’s 50 Best Bars list in 2013 and 2014 and won Australian Bartender Cocktail Bar of the Year in 2018.

Ms Madrusan told the Herald Sun the Melbourne hospitality industry was facing “really difficult challenges”.

“Looking at restaurants and breweries being forced to close on a daily basis is really sad and the industry isn’t getting the support it needs to thrive in Melbourne,” she said.

“(For us), we didn’t really feel the impacts of Covid until later on. The costs involved in restarting the businesses were large – switching everything back on and re-employing staff.

“In lockdown there was some support but that’s no longer available to us.”

The Everleigh made the highly coveted World’s 50 Best Bars list in 2013 and 2014. Picture: Josie Hayden

Ms Madrusan said there needs to be incentives around supporting spending in the sector and initiatives to help offset rising costs.

“The cost of food and alcohol and rent, everything. None of those things have been held. And there’s also a pressure not to raise prices,” she said.

“Margins across the board are slimmer than they’ve ever been.

“There needs to be celebration for the small businesses that are fighting hard to survive and deserve to get attention.”

Ms Madrusan said she was looking to “get back to trading as normal”, particularly heading into Melbourne’s peak festive season.

“There’s no shying away from the fact things are tough, but we are looking into the future,” she said.

“We are grateful to our suppliers and staff who have supported us through this process, who believe in the future of these businesses with the same passion that we do.”

Originally published as Hospitality group behind Heartbreaker facing turmoil over $1.5m debt pile