Jon Adgemis has surrendered the game, filing for bankruptcy as he is said to owe billions, Deutsche Bank takes control of his last five pubs, and a showdown with the ATO loomed in Federal Court.
The former KPMG banker had ambitions to build a hospitality empire, based in the principle of buying under-performing city hotels and remodelling with boutique accommodation and better f&b offerings, to attract a more upmarket clientele.
After a modest start assisted by the input of wealthy acquaintances, acquisitions ramped up during the pandemic, bringing in 16 more assets to total 22 across Sydney and Melbourne – many of which need significant refurbishment.
As inflation and post-pandemic costs surged he tapped the hungry private credit market, signing for short-term high-interest debt, based on valuations using the projected figures of the completed renovations, which far outweighed the purchase prices.
Fending off nervous creditors, mid-2024 Adgemis secured a rescue package of $400 million led by Deutsche Bank, to save Public Hospitality Group from collapse.
But this was too late to prevent New York-based lender Muzinich from taking control of five of the pubs in September of 2024, claiming debts of $126 million.
Subsequent attempts to recoup its money through sale of these assets, which are in assorted stages of completion, has proven challenging and late last year Solotel took control of the operations of The Norfolk, Oxford House and Camelia Grove.
After weeks of speculation, and a Federal Court ruling allowing the Tax Office to steer a bankruptcy hearing scheduled for Friday, on Tuesday the lenders who had stuck with Adgemis pulled the pin and appointed McGrathNicol as receivers.
Then, on Thursday, the debt-laden 47-year-old surprised his pursuers by accepting the inevitable and moving to bankrupt himself, appointing Andrew Yeo of Pitcher Partners as his bankruptcy trustee.
He is said to have told his trustees he had just $3.79 in savings, beside something like $9 million in tangible assets and over $500K of luxury cars.
A report by the trustee suggested he had been relying on cash from the failing business empire to sustain a lavish lifestyle, including more than $2 million used to pay loans on his 95-foot yacht, named Hiilani, which has since been seized and sold by the Commonwealth Bank.
The bankruptcy means he can no longer manage a company or own a vehicle valued at more than $9,600.
In a statement, Adgemis spoke of his failed plans and precarious position.
“I take 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.”
A total reported debt figure of $1.8 billion is understood to include around $370 million to Deutsche Bank, which held security over the five pubs repossessed this week, and more than $438 million to Sydney-based private credit firm Gemi Investments.
Other creditors include the ATO, contractors and small businesses, and around 800 former employees.
From the final collection, Deutsche and Gemi plan to immediately conduct sale campaigns on the two pubs that are trading, the Empire Hotel in Annandale and Hotel Diplomat in Potts Point.
Unfinished works will be completed at Balmain’s The Exchange, Darlinghurst’s Claridge House, and the former Noah’s Backpackers, now called the South Bondi Hotel, before their sale.
The greatest losses are likely to be seen by the private credit entities, which have taken up some of the slack in the property market since many banks took a lower position following the global financial crisis.
While the grandson of Greek migrants will see his debts wiped by the bankruptcy process, he will likely face intense scrutiny when the liquidators interrogate him in court.
A recent attempt to fend off bankruptcy saw Adgemis offer cents on the dollar, which involved paying $3 million over 12 months, with security through assets already encumbered.
But both the bankruptcy regulator and ATO intervened, the government office accusing him of continuing an “extravagant lifestyle” not suited to someone in his position, including living in a luxury Bondi apartment costing $60K per month and driving around in a late model Mercedes. They called for a vote on the deal be halted.
Allegations of improper and potentially fraudulent GST claims are being investigated by BRI Ferrier and the Tax Office, and documents suggest potential tax debts of nearly $300 million, across 27 companies.
While Adgemis may have avoided the ATO’s hearing in the Federal Court for now, BRI Ferrier is expected to launch its own public examinations in the Federal Court, which could see the principal and some of his business associates giving evidence via testimony.
The outcome is in stark contrast to the polished plans Adgemis was previously spruiking to investors, looking to a $470 million float of Public Hospitality Group on the ASX.
