High flying banker turned publican Jon Adgemis has secured a $400 million refinancing deal to save his floundering hospitality gambit, but will be forced to sell down.

According to sources, an agreement has been reached this week with the group’s major lenders Deutsche Bank, Gemi Investments and Archibald Capital, providing funding earmarked to pay staff, suppliers and creditors.

A condition of the deal is that a new general manager with industry experience is to be appointed to manage the Public Hospitality portfolio, and Adgemis is to step back from direct management.

Around $30 million is to be allocated to the completion the re-developments at several of the venues, such as Noah’s Backpackers in Bondi.

Possibly eight venues will be divested, creating a dedicated equity fund of $70-80 million, controlled by Archibald Capital.

Public’s Melbourne pub assets will also be sold off, into a separate fund.

Adgemis was a senior M&A advisory partner for KPMG until 2018. Since then he has invested heavily into the business of hotels, gathering around 20 venues, ranging from The Strand in Darlinghurst, bought from Oscars in 2021 when known as Jaga Group, to the Lady Hampshire of Camperdown, acquired in 2022, to Melbourne institutions, such as Guy Grossi’s Puttanesca Osteria.

At a number of the venues Adgemis predicted major increases in valuation, through renovations adding accommodation. Brokers pitched to investors loans based on the completed works and assuming valuations reflecting the presumed uplift.

Beyond finance doled out during a period of high interest rates, and consumers tightening the purse strings, trouble truly began for Public when many of the renovations fell behind schedule.

More loans were secured to meet existing obligations and continue the strategy, leading to reports many hotels held caveats and some have up to four mortgages.

There was a lot of talk about a refinancing deal with American private equity players Bain Capital earlier this year, but talks ended before an agreement was finalised.

In the meantime, Public was paying almost 12 per cent interest on its debts, and a mezzanine loan component has been charging up to 18 per cent.

Image: Google maps, December 2023

Under the sheer weight of the commitments, staff and suppliers were not being paid, and the Australian Taxation Office lodged a tax default notice at the end of April for $10.7 million.

Some lenders began attempting to sell off assets belonging to Adgemis, bringing the Empire Hotel of Annandale to market, although it was withdrawn the following week.

To date sale of Adgemis assets has seen no joy; both an apartment block in Bondi, backed by Angas Securities, and Manor House in Darlinghurst, through Millbrook, have passed in at auction in the past week.

A spokesperson for Public was unable to provide PubTIC details prior to publication on which hotel assets will be sold.

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