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Derrimut 24:7 Gym founder Nick Solomos has appointed administrators to the largest company within his floundering fitness empire, just days after billionaire businessman Adrian Portelli backed out of a lifeline deal.
Employees were informed on Thursday in an all-staff missive, seen by The Age, that stressed that it was business as usual for the gym chain, which is estimated to have racked up a near $30 million debt pile.
Nick Solomos placed a key company within his Derrimut 24:7 gym empire into administration on Thursday. Credit: Eddie Jim
“This decision was not made lightly, but it represents a proactive step to give us the best possible opportunity to restructure, protect jobs, and position the business for a stronger future,” Solomos wrote.
All staff will continue to be paid weekly, and members will still have access to all of its 26 gym locations, he said.
Solomos also said a new investor had joined the company to “work closely” with Derrimut throughout the administration process. The identity of the new investor is unclear.
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Stephen Dixon, partner of insolvency firm HM Advisory, has been appointed administrator of the debt-riddled entity, according to documents filed with the corporate regulator.
The Australian Tax Office has been seeking to liquidate Derrimut’s primary operating entity as well as a now-dormant company to claw back $15.4 million in tax debts, unpaid superannuation and penalties.
But last week, the ATO agreed to delay its move to liquidate the entity, allowing Derrimut extra time to settle its mounting debts.
ATO lawyer Seraphina Smith sought an adjournment of four weeks in the Federal Court to allow this additional time, which was granted by the court but opposed by a number of major supporting creditors.
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Those opposing the adjournment included energy provider AGL, Derrimut’s former landlord Bourke Street Properties and gym equipment company Life Fitness. They are a fraction of the businesses chasing late payments from Derrimut.
The opposing creditors were seeking a shorter adjournment time from the Federal Court and more documents detailing whether the business could be solvent in the future.
Hours after the adjournment was approved, Portelli announced he had walked away from the deal saying he could not see eye-to-eye with the owners.
Derrimut’s lawyer has been contacted for comment.
It’s estimated that Solomos would need at least $30 million to clear debts to the Tax Office and creditors of his three main entities – including landlords, power companies, equipment suppliers and trades contractors.
An investigation by The Age revealed in September that the rapidly expanding Melbourne gym empire had been failing to pay taxes, staff superannuation and hundreds of businesses and landlords.
Solomos’ company accounts have been used for $5000-a-week pocket money, to make mortgage payments on his property portfolio, to fund more than $30,000 a week in payments to his ex-wife and to give luxury cars to senior staff.
More to come
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