Another hotel group collapses with $100 million in debt

Collapses in Australia’s stricken hotel sector show no signs of ending, with Perth-based Compass Hotel Group the latest operator to fall into the hands of receivers.

Receivers Quentin Olde, Ian Francis and Michael Ryan of insolvency firm Taylor Woodings were appointed to the sharemarket-listed group yesterday, after secured lender St George Bank, a subsidiary of Westpac, lost patience with the debt-laden group.

Compass Hotel’s latest financial statements, released in February, show the company had liabilities of more than $100 million. It is believed the bulk of that it owed to St George.

Compass owns 12 hotels in Perth, including Carine Glades Tavern, the Belmont Hotel and the Albion Hotel.

The company reported a net loss of $3.38 million for the six months to December 31, compared with a net profit of $1.77 million in the previous corresponding period.

Compass listed in 2008 after spending about $190 million buying up pubs around Perth. The company raised $123 million at $1 a share in its IPO, but with the pub market on the nose with investors and lenders, the stock has not traded above 10c since early 2009.

However, the prospects for selling the Compass pubs – either individually or as a group – do look reasonably bright.

Receivers Quentin Olde says the businesses will continue to trade while the receivers assess the state of the group.

“The group’s employees, including staff working at the hotels and bottle shops, will not be impacted by the appointment of the receivers,” he said in a statement.

“We will maintain communication with key stakeholders, including employees, throughout this process and will provide more detail to these stakeholders as it becomes available.”

The collapse of Compass comes just weeks after Sydney pub group Icon Hospitality collapsed owing main lender creditor Commonwealth Bank $60 million.

Astute pub buyers including Arthur Laundry and John Singleton has signalled an intention to target distressed pub assets, but industry sources say these buyers may wait to see how low asset valuations fall before moving into the market in force.