honestbee proposes to repay creditors 3 cents on dollar in cash, rest in equity

FORMER honestbee chairman Brian Koo and his venture firm, Formation Group, plan to use a cash payment to settle 3 per cent of what the embattled startup owes to about 800 creditors, The Business Times (BT) understands.

The remaining 97 per cent will be repaid via the issuance of shares in a new Singapore entity that will own honestbee's assets, under the startup's proposed scheme of arrangement to restructure its US$209 million worth of outstanding debt.

Separately, there are more than 1,000 trade creditors that are owed S$500 or less each. They will be repaid in full and thus be excluded from the scheme, sources told BT. These debts amounted to over S$150,000 as at Dec 31.

The sources said FLK Holdings, a US-incorporated vehicle owned by LG scion Mr Koo and Formation Group, plans to inject fresh funds of US$7 million into honestbee for the cash payment to the 800-odd creditors.

The rest of what is owed will be converted to equity in a Singapore-incorporated company, which will take over the grocery delivery startup's assets. Creditors will receive shares in this new firm, although the conversion ratio and issue price of the shares have not been revealed to creditors.

If the scheme gets the green light, creditors will own between 70 per cent and 75 per cent of the new Singapore firm, BT understands. At the lower end of this range, this could value the firm at about US$290 million, assuming creditors are issued about US$202 million worth of shares.

The single-largest shareholder will likely be the vehicle A Honestbee, which is majority-owned by Yesco, Mr Koo's family business. Formation Group and Mr Koo will also have significant stakes, both directly and via FLK. 

Mr Koo was an early backer of honestbee, and took over as interim chief executive officer (CEO) and later as chairman of the startup after its troubles surfaced in mid-2019.

He has since resigned as chairman, while regulatory filings indicate that he remains a director. However, an honestbee spokesman told BT that Mr Koo had resigned as director of the firm on Sept 12 last year.

honestbee's former CEO Joel Sng still owns about 82 per cent of the company's ordinary shares, which makes it likely that the proposed scheme will require his vote to be passed. Post-restructuring, Mr Sng's stake could be heavily diluted. 

Sources told BT that honestbee plans to group all eligible creditors within the same class to vote on the scheme. For the scheme to be approved, at least 50 per cent of the number of voting creditors and at least 75 per cent of the debt value they represent must vote in favour of it. The scheme also requires the High Court's approval. 

In previous court filings, honestbee's restructuring advisor DHC Capital had said that creditors would receive between zero and one cent on the dollar if the company were to be liquidated. 

Formation Group is honestbee's sole secured lender, giving it seniority over all other financial and trade creditors. honestbee had previously taken out US$4 million in loans from two funds under the venture firm that were secured by charges over all of the startup's assets.

honestbee is understood to not have received any other firm offers from potential white knights thus far. In December, The Ken reported that honestbee was in talks with Philippine conglomerate JG Summit over a potential rescue deal.