SINGAPORE – Singapore-based sofa maker HTL, which owes various banks US$46 million ($65 million), has filed for insolvency protection, citing a cash-flow crunch as a result of the Covid-19 pandemic.
The previously public-listed company, which has more than 5,000 employees worldwide, is seeking judicial management (JM) after DBS issued a legal demand for full repayment under its banking facilities.
In an affidavit seen by The Straits Times, HTL chief operations officer and director Robert Chew said that the company is not able to obtain temporary relief under the Covid-19 (Temporary Measures) Act that kicked in on April 20.
Under the Act, businesses that are unable to fulfil certain contractual obligations due to the coronavirus pandemic can get legal reprieve for six months.
But the banking facilities granted to HTL are not covered under the specified categories eligible for relief, said Mr Chew.
HTL, represented by lawyers Pradeep Pillai and Joycelyn Lin, filed an application for JM on April 24.
On Tuesday (May 5), interim judicial managers from Deloitte & Touche were appointed by the High Court. Hearing dates for the JM application are expected to be fixed in early June.
Deloitte partner Tan Wei Cheong told The Straits Times that HTL was still functioning but facing “short-term financing difficulties” because of delays in collection of payment from customers in Europe and the United States.
Hence, the JM application was made in respect of parent company HTL International Holdings, in order not to affect the operations of the various subsidiaries.
“We do not foresee a disruption to the functioning of the group as a whole. Our intention as interim judicial managers is to find a way to help to restructure the group, to find a white knight,” he said.
The HTL group began as Hwa Tat Lee, founded in 1976 by three brothers – Phua Yong Tat, Phua Yong Pin and Phua Yong Sin – who pooled together $10,000 to make PVC sofas.
It was one of the few small companies to secure a listing on the mainboard of the Singapore stock exchange in 1993.
Over the years, the business built up a reputation for manufacturing leather furniture and established a presence in 52 countries. The company’s name was changed to HTL in 2000.
HTL managing director Phua Yong Tat was named Businessman of the Year at the Singapore Business Awards held in 2006.
The company was delisted in 2016 and acquired by Chinese furniture company Yihua Lifestyle Technology.
Mr Chew said HTL’s core manufacturing activities in China were severely affected as a result of factory closures and movement restrictions imposed to control the spread of the coronavirus.
As the outbreak spiralled into a pandemic, lockdown restrictions around the world led to an overall delay in deliveries, while customers have also asked for payments to be deferred until June or July, he said.
“The delays in collection of revenue have caused serious cash-flow problems,” said Mr Chew.
Attempts were made to reach out to Yihua, but no funding has been provided to date, he added.
On April 3, DBS told HTL it was cancelling banking facilities and demanded payment of all outstanding sums. A statutory demand was issued five days later.
As at April 21, HTL owed US$7.8 million to DBS.
Mr Chew said that, based on its current financial position, HTL is unable to pay what is due to DBS and other lenders.
He asked for “breathing space” from its creditors, so that judicial managers can consider a potential deal for Mr Phua Yong Tat – who is not a shareholder – to buy out the company.
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