Derrimut gym empire enters administration

Derrimut 24:7 Gym founder Nick Solomos has appointed an administrator 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 it was business as usual for the gym chain, which is estimated to have racked up a near $30 million debt pile.

With the gym chain facing forced liquidation at the end of the month and without the prospect of a billionaire backer, Solomos handed over control to insolvency firm HR Advisory on Thursday in a final bid for survival.

It comes just a week after the Australian Tax Office controversially agreed to delay its move to liquidate the entity, allowing Derrimut extra time to settle its mounting debts.

“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 to employees.

All of its 800 or so staff will continue to be paid weekly, and members will still have access to all of its gym locations across Victoria and South Australia, 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.

Stephen Dixon, partner of HM Advisory, has been appointed administrator of the debt-riddled entity, according to documents filed with the corporate regulator on Thursday.

Dixon will now be tasked with investigating Derrimut’s financials to see if there is any way the company can pay off its debts and save itself from collapse. His appointment means creditors will have to see through the administration process and consider any sort of deal proposed by Derrimut before they can make demands for the money they’re owed.

The ATO 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.

However, ATO lawyer Seraphina Smith sought an adjournment of four weeks in the Federal Court last Friday, after the tax office agreed to delay its move to liquidate the entity.

The adjournment was granted by the court but opposed by a number of major supporting creditors.

Those opposing the controversial 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 documents to prove the business could be solvent in the future.

Hours after the adjournment was granted, Portelli announced he had walked away from the deal saying he could not see eye-to-eye with the owners.

Derrimut’s lawyer did not respond to requests 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.

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