POPULAR Newcastle restaurant Napoli Centrale has avoided liquidation and will remain open after creditors voted in favour of a deed of company arrangement (DOCA) to accept two cents in the dollar.
The Italian pizzeria, which opened in 2014, was placed in the hands of an administrator in August after the ATO issued penalty notices to directors Alfonso Muras and Megan Lynch due to $507,000 in unpaid tax.
Under the deal, unsecured creditors including the ATO, will receive less than $13,000 from the $640,000 they are owed.
However, the King St restaurant will remain open, with its 10 staff to keep their jobs.
According to reports from administrator Mitch Griffiths, of Rapsey Griffiths, Napoli's financial woes began when it loaned more than $1 million to related businesses Popolo Artisan Gelateria, $330,056, and Piazza Mercato, $767,837, which were both placed in liquidation last month.
Chef-owner Mr Muras said the businesses "felt the full wrath" of COVID-19.
"Unfortunately, we had committed to Piazza Mercato and the expansion of Popolo just prior to the COVID-19 pandemic," he said.
"Despite Piazza Mercato having a successful opening period, the multiple lockdowns decimated the business with a decline of more than a 70 per cent in sales after the last lockdown.
"We truly believed in the Piazza Mercato concept and wanted to combine great Italian food and live music in one venue, but the timing couldn't have been worse."
Popolo went into liquidation last month owing $502,123, of which $375,000 was unpaid tax, $59,000 was owed to suppliers and $395,000 to two landlords.
There will be no return.
Its King St outlet, across the road from Napoli, will remain open and continue to trade following a restructure of the business group, but Popolo stores at The Junction and Charlestown are closed.
Hunter Street's Piazza Mercato was also liquidated last month with debts of $1.3 million, including a series of related-company loans totalling more than $700,000.
No return is expected.
More than 30 Piazza employees are owed $121,000, the ATO $225,000 and unsecured creditors $232,000.
Employees of the two liquidated businesses will be able to make a claim under the federal government's Fair Entitlements Guarantee, which picks up the tab for workers' entitlements when their employer collapses without enough money to cover them.
According to Mr Griffiths, Napoli owes 88 past and present staff $147,000 in unpaid superannuation.
Under the DOCA, which the ATO voted for, employees are expected to receive full payment of their superannuation entitlements.
Mr Griffith, who recommended creditors accept the DOCA, said if Napoli went into liquidation, no return was expected for employees' outstanding superannuation.
When he took control of the pizzeria in August it had $11,000 in the bank.
The directors called in administrators on August 5, saying the due to the tax debts Napoli was either insolvent or likely to become insolvent.
Under the DOCA agreed to by creditors on September 7 and lodged with the corporate regulator on September 29, Napoli will pay $245,000 to creditors in 30 monthly instalments to February 2025.
This equates to a return to unsecured creditors, which the ATO is the largest, of 2 cents in the dollar.
Mr Muras said Piazza Mercato "ultimately drained the group"
"We employed many Italian staff on visas which we continued to employ despite not receiving any government support," he said.
"We have made some difficult decisions and restructured the businesses to ensure Napoli Centrale and Popolo King St continue on."
Although it's been a difficult two years, Mr Muras said he was optimistic about the future.
"I'm healthy," he said.
"Everyone in the hospitality industry has been dealing with similar challenges. There is no doubt this has been a terrible time but I'm still standing.
"I have chosen to live and build a business in this city because I love Newcastle and want to share my culture.
"Despite the challenges, I plan to be here for many years to come."
Since opening eight years ago, Napoli has cemented itself as a foodie favourite in Newcastle.
The pizza bar, at 173 King Street, Newcastle, is renowned for its Napoli-style pizzas, cooked at 450 degrees for mere minutes in a wood-fired oven that was hand-built in Naples.
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