Paring down debt pile top of mind for honestbee's new CEO

Singapore

A CONSORTIUM of white knights and strategic partners is what honestbee's newly-minted chief executive Ong Lay Ann believes will turn the embattled grocery delivery startup around.

But first, paring down honestbee's debt is his immediate priority, Mr Ong, who was appointed on July 15, told The Business Times in an exclusive interview on Monday.

Mr Ong identified two main groups that honestbee owes "a large debt" to - the merchants it worked with and "a whole lot" of investors who subscribed to convertible notes that honestbee issued as part of fundraising. honestbee declined to share the sum owed to either group.

"There needs to be a certain level of restructuring (of debt) to resolve all of this ... The way that the capital structure (of honestbee) was set up, we ended up with a lot of creditors. Those all need to be addressed at one go. As part of the review, my intention is to resolve that as soon as possible," he said.

honestbee declined to reveal how much it has raised. Thus far, it has only disclosed the US$15 million in Series A funding led by its key backer, US-based Formation Group, in 2015. Its regulatory filing lists two Formation funds as secured creditors.

But according to a 2017 regulatory filing, honestbee raised US$50 million via convertible notes issued to a Singapore-registered entity, "A Honestbee". The entity's largest shareholder is Yesco, a unit of the Korean conglomerate LS Group. The latter is owned by the family of Formation's managing partner Brian Koo.

Mr Ong declined to comment on the identities of specific creditors. When asked if he will invest in honestbee to help with its cash flows, Mr Ong said that he is still evaluating his options, being two weeks into the job.

"All the options are on the table; I haven't ruled out either an equity stake or a loan to the business. First, I'm trying to assess what are the pieces honestbee has, what is missing and what I need to do to turn this company around," he said.

In any case, Mr Ong will soon be a shareholder. His compensation as CEO will be a mix of cash and equity, with the latter ensuring "that my interests are aligned with the shareholders", he said.

But Mr Ong emphasised that he is not a white knight "coming in with a pile of cash". Instead, it will take a "consortium of white knights" to right the course of the company, alongside strategic partners who can help with expansion, he said.

"This is something that requires a fairly sizeable fix ... In this situation the funding requirement will be larger, so we'll be open to working with parties to rebuild honestbee," he said.

Mr Ong takes the helm as the last of honestbee's three co-founders departs. On Monday, honestbee announced that chief technology officer Jonathan Low had resigned on July 11 and would serve until Wednesday.

Founded in 2015 by Mr Low, Joel Sng and Isaac Tay, honestbee operated a grocery delivery business, alongside food delivery, an on-demand laundry service and a business-to-business logistics service, honestbee Goodship. The startup expanded to Malaysia, Indonesia, Thailand, the Philippines, Japan, Taiwan and Hong Kong.

But after honestbee's cash crunch came to light in late April, it rapidly downsized. Honestbee laid off 10 per cent of its global headcount and halted operations in Indonesia and Hong Kong, while suspending activities in all other foreign markets. It has also halted food delivery and suspended the laundry business in Singapore. honestbee Goodship ceased operations on July 26.

Mr Ong remained tight-lipped on which verticals and markets honestbee will focus on moving forward, citing the ongoing review. But he cited habitat, the startup's brick-and-mortar store, as having potential.

"There are plans to roll out other habitat (outlets) around the region. The approach we take there is one where we want to (form a) JV in each country with the right partners and work together to develop a habitat in each country," he said.

Mr Ong is also willing to relook markets where operations have halted. He cited Indonesia as a possibility, where he has family and connections. "Markets that we say that we have exited, we may eventually come back. I'm prepared to tear up the previous announcements that we have made and to start again," he said.

When asked how he will build confidence in his leadership, Mr Ong said that he is experienced in dealing with distressed companies.

He said that he saved an Australian firm from judicial management by acquiring its assets via another entity, and listing it on the Australian Stock Exchange via a reverse takeover. Mr Ong is now a director at the listed firm, Weststar Industrial.

With a background in commodities, he serves as a non-executive director at ISDN Investments, the unit of ISDN Holdings involved in energy-related investments.