Selling Virgin Australia
Plus a revealing exit for the collapsed hospitality empire of Jon Adgemis.
Before I come to the principal subject of today's column, permit me a momentary, nostalgic detour.
In May 2023, I wrote a column in the Australian Financial Review exposing the insane debt load of Jon Adgemis's Public Hospitality Group, the double-the-purchase-price valuations that supported the raising of that debt and other misrepresentations made by those lenders to their clients.
After I left the AFR, my former colleagues Primrose Riordan, Max Mason and Sarah Thompson quite brilliantly pursued this story. Adgemis's money-go-round empire has been sold for parts and he is barely staving off bankruptcy. His mother is now in the NSW Supreme Court fighting a repossession order on her house because he mortgaged it to finance his business activities (she says, without her knowledge). What a guy!
Last week, Balmain's historic Town Hall Hotel was sold by receivers Wexted Advisory, appointed by one of Public Hospitality's lenders, La Trobe Financial.
I could only laugh. Adgemis bought the Town Hall in 2017 for $7 million. By 2023, La Trobe had given Adgemis a $12 million first mortgage over the pub. Then he took out a $9 million second mortgage from Millbrook, paying interest of 20 per cent per annum; then a third mortgage with Belgravia (amount unknown). This suicidal leverage was supported by a patently ludicrous $29 million valuation provided by God only knows.
On Thursday, the receivers sold the Town Hall for $9.5 million. Ladies and gentlemen, welcome to private credit!
Again and again, we see intelligent people so easily separated from their money by fast talkers. It continues to amaze me. Pity the suckers who funded Adgemis and his desperately conspicuous playboy lifestyle.
Also last week, a rash of local broking desks initiated coverage of Virgin Australia, which debuted on the ASX on June 24.
At Barrenjoey, one of the lead brokers on Virgin's IPO, the equities research team released a 30-page report touting "the sustainability of [Virgin's] lower non-fuel costs" and concluding that "the financials of the re-launched Virgin 2.0 reveal a significant reset of the cost base."
The report is a worthy read, replete with new and penetrating data, though some of these contents I feel undermine its chosen narrative of "further upside from here".