Coronavirus: Co-founder in talks to save home-grown sofa maker HTL

Former mainboard-listed sofa maker HTL International may currently be facing Covid-19-related cash-flow challenges, but the company's co-founder Phua Yong Tat, who is no newcomer to adversity, may be able to steer the home-grown company out of troubled waters.

HTL owes various banks a total of US$46 million (S$65 million) and filed an application for judicial management (JM) on April 24. The company is represented by lawyers Pradeep Pillai and Joycelyn Lin from PRP Law.

Last Tuesday, interim judicial managers from Deloitte and Touche were appointed by the High Court pending the hearing of the JM application, which has yet to be fixed.

But according to an affidavit seen by The Sunday Times, Mr Phua, who is no longer a shareholder of the company, has indicated that he wants to buy all of HTL's interests in its subsidiaries.

Mr Phua could not be contacted as of press time.

HTL's chief operations officer and director Robert Chew, who filed the affidavit on behalf of the company, is asking for "breathing space" from its creditors.

HTL is not able to obtain temporary reprieve under the Covid-19 (Temporary Measures) Act of April 20 as the banking facilities granted to HTL are not covered under the Act.

It is understood that HTL is still functioning but facing short-term financing challenges because of delays in the collection of monies due from customers in Europe and the United States.

The JM application was made for parent company HTL International Holdings, so as not to affect the operations of its various subsidiaries.

The home-grown tanning and upholstery company was started in 1976, when Mr Phua Yong Pin, a skilled upholsterer, set up "Hwa Tat Lee" with brothers Phua Yong Tat and Phua Yong Sin.

They pooled together $10,000 to make PVC sofas, primarily for the Singapore market.

The trio set their sights on selling the firm's designs in the Asia-Pacific region in the 1980s after acquiring design and technical know-how from German furniture maker G Laauser GmbH & Co.

By the end of the 1980s, the company started its first overseas manufacturing operation in Kulai, Malaysia. It wasted no time moving into the first phase of its international expansion to establish its presence in Hong Kong, Australia and Japan.

In 1993, it was one of a few small local companies to secure a listing on the mainboard of the Singapore Stock Exchange.

Over the years, the company burnished its credentials as a top leather furniture manufacturer and established a presence in more than 50 countries.

Hwa Tat Lee was renamed HTL International Holdings in 2000.

The early 2000s proved promising for HTL. In 2002, HTL was recognised by Forbes Global - an annual ranking of the top public companies in the world by Forbes magazine - as one of the world's 200 Best Small Companies. It stayed in the rankings for three more years till 2005.

The company then acquired luxury German furniture brand Domicil in 2005, with bold ambitions to develop a retail franchise platform for the group.

In 2006, then managing director Phua Yong Tat was named Businessman of the Year at the Singapore Business Awards.

By 2010, HTL had weathered the recessions of 1985, 1997 and the global financial crisis of 2008 to 2009. According to Mr Phua, the company's main struggle was always about managing the growth process within the company.

HTL went on to acquire Corium Italia in 2012, a luxury furniture company based in Tuscany, Italy, which was one of its more strategic acquisitions as it helped establish a production base closer to HTL's main European markets.

The buying sprees paid off: HTL International Holdings reported a profit of US$1.46 million for the first quarter of 2012, after posting a loss of US$440,000 a year ago. Revenue rose 24.2 per cent to US$130.49 million, mainly led by increased sales to North America.

In 2016, HTL was delisted and acquired by Chinese furniture company Yihua Lifestyle Technology.

According to Associate Professor Mak Yuen Teen of the National University of Singapore Business School, for HTL to weather the challenges ahead, it would have to take a long, hard look at its value proposition.

"What can HTL offer that others cannot? It probably needs a total makeover, and to find its niche," said Prof Mak, who is also a corporate governance activist.

"A company like HTL faces challenges on many different fronts. First is the challenge faced by retail, generally, especially high rental costs in Singapore. It is also faced with competition from giants like Ikea which appeal to a diverse range of consumers, and megastores like Courts and Harvey Norman."

Prof Mak also mulled over the "what ifs" in HTL's past. Could the company have fared much better with greater access to funds if it had remained a listed company?

"Maybe being a listed company, notwithstanding greater corporate governance and disclosure requirements, is not that bad after all compared with a private company."