HONESTBEE may lose the support of its white knight, LG scion Brian Koo, the distressed startup told its creditors in an e-mail on Wednesday evening, The Business Times has learned.
In the e-mail, honestbee said that there has been a delay in working capital funds from Mr Koo’s venture firm Formation Group, as well as FLK Holdings, a US-incorporated vehicle owned by Mr Koo and Formation, which was to have financed the startup's restructuring of US$230 million in debt.
In addition, FLK and Formation are now re-considering their continued support for the company due to “the worsening Covid-19 pandemic across the world and the resulting uncertainties”, honestbee said in the e-mail.
Under honestbee’s proposed restructuring, FLK was to have injected US$7 million into the company to repay creditors owed above S$500 each, with 3 cents on the dollar in cash. honestbee was to have repaid the remainder of its debt pile via issuing creditors equity in a new entity.
Given FLK and Formation’s potential withdrawal, honestbee is requesting the court for an adjournment of its hearing on March 26, “to clarify the position” of FLK and Formation, and to potentially seek new investors for the company.
Separately, Jeffrey Wong, a former director of honestbee, is denying the startup’s allegations that he had breached his fiduciary duties during his time with the company.
On Tuesday, the startup announced that it has sent letters of demand to Mr Wong and to its former chief executive Joel Sng over the alleged breaches of fiduciary duties. The distressed startup said that it has “discovered numerous irregularities” after investigating past transactions that Mr Sng and Mr Wong were involved in during their time with the company.
Speaking to The Business Times on Wednesday, Mr Wong denied all allegations against him. He confirmed that he had received honestbee’s letter of demand, which was dated March 9, and said that he had e-mailed back a letter dated March 16 denying any breach of duties, to honestbee chief executive Ong Lay Ann.
On Wednesday evening, an honestbee spokesman told BT that the company had only received a letter by post from Mr Wong, dated March 16, on March 24.
Mr Sng did not respond to a request for comment from BT.
When asked if similar action has been taken against Melissa Kwee, another former director of honestbee, an honestbee spokesman said that the startup has met Ms Kwee and is still assessing its next course of action.
In its Tuesday statement, honestbee highlighted three transactions, one of which involves The Cub SG, a firm in which Mr Sng is said to own a 70 per cent stake and Mr Wong, the remainder. honestbee said that in October 2017, The Cub leased level 2 of 34 Boon Leat Terrace, along with a unit above habitat, the startup’s concept supermarket on level 1.
The startup further said that it had paid for all security deposits and transaction costs, including stamp duties, for the tenancy agreement. honestbee also said that it paid the rent and expenses of about S$51,000 per month, for a year from October 2017, as well as the premises’ architectural design fees, on behalf of The Cub.
honestbee alleges that Mr Sng did not disclose the arrangement with The Cub to the company’s then-board members or shareholders. The premises were left empty and there “was no real benefit or commercial advantage for the company”, honestbee said.
A second transaction honestbee cited in the statement was Mr Sng’s alleged purchase of a house in the Japanese ski-resort town of Niseko under his name, for which the company says it paid US$1.1 million, including acquisition tax and alongside other costs. honestbee alleges that the property had “no apparent real benefit or commercial advantage”.
The third transaction involves PayNow Pte Ltd, an e-wallet firm that honestbee said Mr Sng had incorporated in January 2017 and solely owned. honestbee says it had subscribed for a 20 per cent stake in PayNow for S$1 million, upon Mr Sng’s alleged representation that PayNow had a product ready for launch.
honestbee says that between August 2017 and February 2018, it had paid a further S$6.4 million for the purported purchase of Mr Sng’s shares in PayNow, upon the then-chief executive’s instructions. These were not disclosed to the board before September 2018, honestbee said. The startup further alleges that PayNow did not have a minimum viable product that was ready to launch at that time.
In the press release, honestbee said that the transactions flagged are non-exhaustive and that its investigations are ongoing.
In his March 16 response to honestbee, Mr Wong said: “It is surprising to me that the letter was issued without any prior discussion as some of the factual inaccuracies in the letter can be easily confirmed, and given that I have supported the company through difficult times of its board and management transition.”