Two creditors owed more than what Victory Offices (ASX: VOL) is worth have applied to the Victorian Supreme Court to have the co-working and serviced offices operator wound up.
As per court documents obtained by Business News Australia, Victory Offices owes two creditors $3.5 million in total - at least $985,269 of which is unpaid rent and associated interest which was due and payable to retirement village operator Zig Inge Group at least since 16 May 2022.
This compares to VOL's market capitalisation which was $2.84 million at the close of trade yesterday.
The remaining $2.5 million is owed to Maia Financial - a subsidiary of KKR & Co and HPS - which will have a representative appear before the Supreme Court at a hearing into the winding up matter on 13 July.
In addition to the application for Victory to be wound up, Zig Inge Group - founded by retirement village mogul Zig Inge who passed away earlier this year - has requested that Shane Cremin of Rodgers Reidy be appointed by the court to act as the liquidator of VOL.
The legal action comes amid a raft of office closures for loss-making Victory, including the complete exit from the Sydney CBD co-working and serviced offices market and three additional closures in Melbourne.
The debt in question relates to unpaid rent for an office block leased to Victory by Zig Inge Group in St Kilda - one of the three Melbourne CBD spaces that VOL closed in early June.
“The closed locations were likely to continue to operate at a loss for some time into the future and the decision to exit is expected to have a positive impact on the company’s remaining portfolio of office locations,” VOL said at the time.
In June, VOL’s board said it was confident it would “return to profitability sooner than anticipated”, and confirmed it was in compliance with continuous disclosure obligations.
In a statement issued on 21 June, Victory said its failure to pay Zig Inge Group was due to “an inadvertent administrative error”.
“Despite the application, and further to the company's most recent half-year report dated 28 February 2022, in the directors' opinion, there continues to be reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable,” VOL said.
“Accordingly, the company has engaged lawyers and advisors to oppose the application.”
Victory Offices did not respond to further requests for comment issued by Business News Australia.
However, in its annual report published on 30 September, the consolidated entity indicated it had received a letter from companies controlled by managing director Dan Baxter stating they would provide support to ensure debts would be met as and when they fell due. According to that same report, the MD held 73 per cent of shares at the end of FY21.
The turmoil comes around a year after Victory announced it had been locked out from three offices in Melbourne and Sydney over allegations of unpaid rent as well as outgoings and cleaning contributions.
It also follows the release of VOL’s 1H22 results in February, when the company blamed its “difficult period” on COVID-19 driving a trend toward people choosing to work from home instead of in its serviced offices and co-working spaces.
At the time, the company reported revenue from flexible workspaces was $7 million, compared to $6.6 million in 1H21.
The company delivered a net loss after tax in the period of $25.9 million, including an impairment on assets of $2.4 million. By comparison, the company’s loss for 1H21 was $17.7 million.
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