“Trickery” and a “Cover of Darkness” Deal: Pacha’s Brooklyn Mirage Takeover Gets Caught Up in Court

By Scott Enman

A group of unsecured creditors for the Brooklyn Mirage is pulling its support for a bankruptcy agreement after it learned, in a Brooklyn Magazine exclusive on January 1, that Axar Capital Management had brokered a deal “under the cover of darkness” with FIVE Holdings, the parent company of nightlife brand Pacha.

The plan was to sell bankrupt Avant Gardner and its flagship venue to the Dubai-based holding company, which would then transform the Mirage into the latest iteration of Pacha New York. In court filings last week, the creditors—artists and vendors owed money and hoping to be reimbursed through AG’s bankruptcy proceedings—said Axar’s deal was “negotiated in secret” and the debtors, committee of creditors, and “most importantly” the court, would never have known about the deal “absent a leak in the press.”

“Suspicions confirmed, it became clear that the Committee’s concerns regarding the trustworthiness of Axar expressed at the beginning of these cases were, unfortunately, well-placed,” the creditors wrote, saying Axar negotiated a pre-arranged “cover of darkness” deal that would have rendered a contingent value right, or CVR, “valueless from its inception.” The CVR allows for creditors to recoup some of their money if Avant Gardner was sold and proved to be “wildly successful.” The creditors say the deal with FIVE Holdings was “simply structured to avoid payment on the CVR.”

While FIVE Holdings’ name is redacted in court papers, global law firm Greenberg Traurig announced on January 22 that the firm would be advising Pacha’s parent company “in connection with its acquisition of Avant Gardner.”

Meanwhile, Axar filed its own court documents, saying creditors were “unreasonably withholding” consent to the CVR agreement. Axar argues the creditors should not be able to pull their support just because the terms of the CVR are “not likely to occur,” noting they themselves would likely be taking a $30-$40 million loss. The company’s lawyers wrote that the firm needed to find sources of capital that would help finance the costs associated with exiting the Chapter 11 bankruptcy process (at least $17 million), day-to-day operating costs ($2 million per month), the demolition of the Mirage ($1.5 million), and rebuilding it in hopes of opening in the spring of 2026.

When the creditors asked Axar’s lawyers for details on the deal shortly after BKMAG’s article was published, Axar’s representatives initially said the report was “incorrect,” according to court papers. Their tone changed slightly on January 9, stating there was “no definitive agreement in place rather than denying the existence of a deal altogether.” Three days later, the committee of creditors said it learned that “the deal was all but done.” The Committee claims they would “not have supported confirmation and would have instead objected to the Plan” had they known these details, the filing says, accusing Axar of “trickery.”

The Committee’s allegations echo a separate lawsuit brought against Axar last year. After Avant Gardner declared bankruptcy in October, a court approved a $110 million sale of the venue to Axar, which Mirage’s other lenders promptly sued over, alleging misrepresentation of the company’s financial condition, Bloomberg reported. 

It all amounts to another strange and unforeseen fold to the somehow ongoing Mirage saga. The outdoor East Williamsburg venue, which underwent a $30 million renovation last offseason, never opened due to failed safety inspections. Its parent company, after declaring bankruptcy, filed for demolition of the Mirage in October. Shortly after the permits were submitted, the city’s Department of Buildings issued objections to Avant Gardner’s application for demolition, but they were ultimately approved in January. Demolition is slated to start on Monday, February 2, and run until April or May.

What’s unclear about the committee’s about-face—first reported by Bloomberg Law—is how it figures into the still undetermined future of the Mirage or Pacha’s takeover of the space. But it’s safe to say Avant Gardner and Axar will have to take care of business in the courtroom before shifting their focus to the dance floor.