Distressed grocery delivery startup Honestbee no longer enjoys court protection for its $230 million of debt after the Singapore High Court on Thursday rejected the company’s request for more time to convene a scheme meeting.
The development was first reported by the Business Times and has been independently confirmed by DealStreetAsia.
We understand that Honestbee, which sought bankruptcy protection in August 2019, sought a court adjournment because of fresh uncertainties over whether it could count on previously stated support from its key backers — venture investor Brian Koo and companies associated with him.
The court’s decision leaves Honestbee exposed to claims from its creditors, which include Koo and parties related to him and his fund, Formation Group. Koo and his related parties control about 90 per cent of Honestbee’s debt, while Formation is also Honestbee’s sole secured creditor for a $4 million loan secured by all of Honestbee’s assets. The rest of the company’s liabilities are split between more than 1,000 unsecured trade and financial creditors, including landlord LHN Space Resources, which has been keen to reclaim the real estate used by the startup to house its brick-and-mortar grocery outlet Habitat.
DealStreetAsia understands that Honestbee had a negative equity position of about $210 million as at mid-2019, with only about $14 million of property, plant and equipment and about $650,000 of cash against its $230 million debt burden. Based on those numbers, unsecured creditors may only be able to recover less than 10 per cent of their claims in a liquidation scenario on the assumption that the company has continued to lose cash since mid-2019.
DealStreetAsia has contacted Honestbee for a response.
Before Thursday, Honestbee’s proposed restructuring plan would have fully repaid in cash creditors that are owed S$500 or less. About 800 creditors would have received three cents on the dollar in cash, with the remaining 97 per cent of their claims in shares of a new company set up to continue Honestbee’s business. The scheme was to be anchored by a $7 million injection by FLK Holdings, a US-based firm in which Koo is a shareholder.
The Business Times reported on Wednesday that Honestbee had told its creditors that there was uncertainty about the support from Formation and FLK in light of the COVID-19 pandemic.
The court’s decision on Thursday raises the odds that Honestbee could be wound up despite efforts by the company and Koo over the past year to keep it alive.
The decision is also the latest in a tumultuous period for the delivery firm. On Tuesday, the startup alleged breaches of fiduciary duties by two former directors and said it had sent letters of demand. One of those directors has rejected those allegations.
A week ago, the Business Times also reported that Honestbee had about $260,000 of art in storage, but that the company was still trying to determine the ownership of all of those pieces of art.
Between August 2019 and now, Honestbee has shut down the bulk of its delivery operations as well as Habitat, which the company had previously described as a possible seed from which to rebuild the business.