Jon Adgemis, definitely bankrupt

Nothing happens quickly in Australia's financial system, but it's finally official: former playboy publican Jon Adgemis is an undischarged bankrupt. Honestly, I never thought Sanjeev Gupta would outlast him in the Olympic events of plate-spinning and fast-talking.

Fun fact: at $1.8 billion, Adgemis's personal bankruptcy comes in as the equal largest in Australian history, tied with Alan Bond's in 1992.[[Obviously, Bond's was much larger on an inflation-adjusted basis.]] It is 10 times the size of Christopher Skase's $172 million bankruptcy in 1991.

Adgemis is the poster child for Australia's booming private credit sector. It's only a wonder that Metrics Credit Partners wasn't in Adgemis's debt stack – it could've converted the debt to equity and folded his Public Hospitality Group into Rockpool! 

In April and May of 2023, I spent more than a week buried in the corporate records of Public Hospitality, its properties, its umpteen subsidiaries and a stack of information memoranda circulated by Public's non-bank lenders to their clients. My resulting investigation in the AFR revealed that Public was already carrying at least $500 million of debt ($95 million of which was interest already paid) despite owning assets for which it paid less than $300 million. Eighty per cent of those assets had been purchased in the prior three years.

I revealed the artifice that enabled Adgemis to borrow so much against so little. He would buy a pub for $10 million, extract a $25 million valuation from a second-tier valuer by citing plans to perform minor renovations (nothing that required planning approval), and then use that valuation to raise a $20 million first loan.

Then he would get a second (and sometimes even a third) loan on top of that.[[A good example was a block of shabby apartments in Darlinghurst that Adgemis intended to rebadge as "Claridge House". Three weeks before Adgemis bought it for $23 million in May 2022, his valuer Egan signed off on a $58 million valuation. Egan based this on two companies having signed leases to pay Public $2.7 million per annum in rent. The valuation report didn't mention that those two companies behind the tenancies were actually owned by Public. A third tenant, Optus, paid rent of just $18,000 per year. Adgemis immediately got a $32 million loan from Gemi Investments and a second mortgage (amount unknown) from Belgravia. The building is now under the control of Public's priority lender Deutsche Bank and being marketed for sale by McGrathNicol.]] It sounds far-fetched, but truly, it was not uncommon for Public to have a debt balance "secured" against a pub of between two and five times its recent purchase price.[[In this recent article, I used the example of Balmain's Town Hall: purchased by Adgemis in 2017 for $7 million. By 2023, he had two mortgages against it of $21 million and a third mortgage of an unknown amount, supported by a $29 million valuation of unknown provenance. In July this year, Adgemis's receivers sold the pub for just $9.5 million.]]

As I wrote at the time: 

Cynicism is evoked by the sight of Adgemis buying a catalogue of second-rate pubs in a red-hot market (largely funded by 15 per cent [interest] loans from the likes of [Gemi's] Justin Epstein), painting the cupboard-sized rooms above the public bar and, with the stroke of a pen on an incredibly punchy new valuation, reinventing the economics of hospitality. I mean, why hasn't anyone else thought of this?

Collating this information and putting it in the public domain threw an immediate spoke in Adgemis's ongoing borrowing spree, and from there, it was only a matter of time until Public unravelled. All of the subsequent machinations between lenders were just a rearranging of the deck chairs.

Several obvious questions arise. Firstly, how did Adgemis think this could end any other way? Public's second-rate properties never had any prospect of generating the kind of cash flows capable of servicing the group's colossal borrowings. 

Secondly, if Adgemis spent less than $300 million on Public's assets but borrowed more than $400 million of principal, where did the rest of the money go?[[$400 million of principal is extremely conservative. There were many loans I didn't know the balance of so didn't count. The balance is now $1.8 billion, and plenty of that is accrued interest at default rates, plus some unpaid taxes and penalties, but clearly the total amount borrowed had to be higher than originally believed.]]   

Thirdly, why didn't the lenders to Public Hospitality Group conduct any of this due diligence themselves? I mean, what variety of moron extends a second or third mortgage to a publican on a valuation that is multiples of the asset's market value with no development application to support such an uplift? 

Adgemis was a known quantity as a troublesome borrower. He was a longstanding adviser to TV proprietor Bruce Gordon, who in 2021 had to sue Adgemis over a $10 million loan. His other major client was Kathmandu founder Jan Cameron. Adgemis managed to borrow $68 million from Cameron before turning against her in a criminal trial brought by the Australian Securities and Investments Commission (Cameron was found guilty of failing to disclose a 15 per cent holding in public company Bellamy's held in a Caribbean trust established by Adgemis. Hold that thought!). 

Poor old Jan Cameron with her pilled sloppy joes and bad dungarees. She was completely groomed. "I'm relieved to have Jon out of my life," she said in 2022, though nobody thought to heed her free lesson. Meanwhile, Gordon was bobbing around on his yacht off Bermuda. Chuck us ten bucks, will ya Brucie? He's so ancient, Jon might've hoped he'd forget. 

Back in 2022, Adgemis landed a few headlines with fantasy talk of an IPO. He signed up Gleneagle's Lance Rosenberg to help him raise a pre-IPO round of $40 million. "Jon's got an incredible flair for pulling in quality management, empowering them and putting it all together, and it's not proven yet, but we really like what we've seen so far". Immortal words.

Incredible flair

Actually, Jon's incredible flair was for separating people who should know better from their money. At that endeavour, he belongs in the hall of fame. It worked on Rosenberg (who tipped in $7.5 million) and it worked on Alex Waislitz – a sexagenarian dweeb who took one look at a slick guy surrounded by hot chicks and all of his lifelong insecurities came oozing out.

Give me your money, Alex, and you can hang with me and my models at my debt-laden nightclubs. Give me your money skater boy, and you too can be cool. Catch my chopper to the races. Bring your girlfriend – the dead ringer for Michael Jackson. Oh, isn't she talented?! Come for a cruise on my mortgaged boat. I'm Sydney's own Ari Onassis.

Lucky for Jon, there are so many Alexes out there. 

It will never not be hilarious how shallow and stupid rich people can be, falling for such an unmistakable spiv in his $20,000 outfits, in his financed G-Wagen, in his rented mansion – his obscenely lavish lifestyle on his magical line of credit. There was nothing there beyond a cloud of putrid cologne and the accoutrements of extreme striving. 

The only thing missing from this picture was Charlie and Ellie Aitken. They were all over the Guptas like bees to the honeypot. Why wasn't Charlie holding the door for Jon at Will Vicars' Pacific penthouse in Bondi? Why wasn't Ellie on the sand holding Jon's towel as he emerged each morning from the surf like Daniel Craig in Casino Royale? Poor Adge has a melon on him like Daniel Craig, that's for sure. He's got an extra two fingers' worth of forehead. 

Bruce Gordon and Jan Cameron got their money back. Lucky them! You can't say the same for these private credit managers, a couple of whom are now going down the tubes with their boy Jon. Ben Madsen's Archibald Capital is owed $136 million by Public and is itself being wound up by the Australian Taxation Office. Angas Securities will lose $19 million, La Trobe $25 million and Belgravia $28 million. Yorkway Private is kissing goodbye to something like $30 million.[[Unlike several other lenders, Yorkway was at least smart enough to have first security over three pubs. Even still, it lent $48 million of principal against pubs that Adgemis paid $27 million for, and Yorkway will be lucky to get $35 million for them now. While Yorkway collected $7 million of interest, it will never see the circa $25 million of interest it is still owed.]]

That's nothing. Gemi Investments, the short-term commercial property lender of George Fleming and Justin Epstein, is owed an astonishing $400 million with only junior security over Public's assets. It is inconceivable that Gemi will survive such a write-off. Pity their fund clients: the most embarrassed families in Sydney's eastern suburbs. They were just chasing yield, the poor petals. Look, I'm no financial adviser, but maybe next time they might try a major bank hybrid paying a 7 per cent coupon? 

Private credit Wild West

There are loose actors in every corner of the investment management sector but if any further evidence was needed that private credit is the Wild West, well, here it is. 

In the case of one loan to Adgemis, Gemi misrepresented to its clients that the borrower was a Mr George Confos, who is Adgemis's godfather. Offering its clients debt to Adgemis's Kurrajong Hotel, APMF told them the bar, restaurant and hotel above were tenanted to reputable third-party hospitality operators when in fact Public was renting the spaces from itself. Australian Pacific Mortgage Fund also told its clients, incorrectly, that Waislitz owned 20 per cent of Public (he was never a shareholder). And with all the veracity of a newspaper rich list, Millbrook told its clients that "Mr Adgemis has a net worth of approximately $205 million". Yeah, and Rampart is Australia's latest unicorn.

Finally cornered last week, Adgemis ran up the white flag and declared, "I take responsibility for the position that has been reached". He was "deeply disappointed" that "despite sustained efforts, I was unable to deliver a better outcome for creditors".

Let's just unpack that, shall we? Talk to us about responsibility, Jon. You owe money all over town. Public owes money to its employees, including their superannuation, but with 'your' very last cash, you paid Willy Vicars 60 large per month to rent a luxury penthouse. How's that taking responsibility? I mean, what's wrong with the Meriton upstairs from the Bondi Junction bus exchange? It was good enough for Charlie Aitken in his darkest hour – before he latched onto his next host. There's no chopper pad, but for the terminally grandiose, they do have a few Westfield-facing two-bedders.

As for his sustained efforts to deliver a "better outcome" for creditors, Adgemis was – until the ATO swooped in to stop him – on the verge of escaping bankruptcy by having his mother and sister pay $3 million to wipe clean his $1.8 billion slate of personal debt. Creditors would have received less than one-sixth of one cent per dollar.[[It wasn't clear where the Adgemis girls were getting this $3 million from, either. Was it originally from Jon and therefore should it actually be in the creditor pool? The bankruptcy trustee (since replaced) had not conducted any serious checks.]] 

Adgemis's mother co-owned a house with Jon in Sydney's Rose Bay where Adgemis's sister had been living until it was seized by La Trobe. His mother told the NSW Supreme Court that Jon had mortgaged the property without her knowledge. She is now fighting La Trobe for half of the sale proceeds. 

Moral bankruptcy

Adgemis has done what no good Greek boy would ever dare: he has completely fucked over his own mother. That's the surest sign of his psychopathy – of his moral bankruptcy. Yianni would've consigned her to Fairfield West caravan park to save himself. Maybe, just maybe, he'd take his G-Wagen out to Shitsville on Mother's Day to drop her an electric blanket. The bishop at St George in Rose Bay must be sorely tempted to excommunicate him. Even John Karantzis moved his mum to Cyprus in a hurry once the Australian authorities failed to appreciate his unique genius.

The authorities are all over Adgemis now. They will inevitably be verifying that no money has leaked offshore. I'm not suggesting that has happened, only that everyone involved will be sensitive to the fact that Adgemis has form when it comes to funnelling assets through low-tax, low-visibility foreign jurisdictions. Just ask Jan Cameron.

There are four sets of eyes on Adgemis: the ATO for their GST; ASIC for employees' superannuation; KordaMentha for the secured lenders; and Pitcher Partners (plus the fraud squad) on behalf of all creditors. That's a hungry pack. Some of them are generating big fees, all of them are baying for a scalp.

The original version of this article stated that private credit firm Yorkway would lose $73 million on Public. This figure has now been adjusted downwards to account for the fact that Yorkway will be entitled to the sale proceeds of three pubs.