S Travel Shutters
S Travel, an agency specializing in South Korea tours, has shuttered. According to Straits Times, its license to operate has been revoked by Singapore Tourism Board today (1-Apr-2016). It has until April 21 to provide reasons against revocation. But S Travel must have already thrown in the towel. It has put up a notice in front of its office on Thursday, asking customers to contact their insurer or Small Claims Tribunal.
What is going to happen to p2p lenders?
I had previously lent to S-Travel through a 3-month loan on Funding Societies, and I was a bit worried when the final Jan repayment was delayed. Nonetheless, I am very lucky to get my money back. Other p2p investors were not so lucky – I know of investors whose CapitalMatch’s loans to S-Travel were only partially repaid, mainly because the loan durations are longer. Are other platforms also affected? I’m not sure, but loans to S Travel will now default. There is a possibility p2p lenders may not get any money back.
What caused the default?
Apparently, S Travel took on too much debt and the business was not improving. High debt and declining business is always a recipe for disaster; once the debt burden goes beyond a tipping point, it is almost impossible to recover. When I previously reviewed its financials, the debt level does not seem excessive: 32% debt-to-equity, 4.7x interest coverage. But the loans (especially p2p loans) are short-term in nature, which means that S Travel will need to repay the bulk of the loan and interest back within 12 months. The straw that broke the camel’s back was when the proceeds from NATAS fair was not as good as it hoped. With little cash to go around, it is only a matter of time before the company goes under. Also, it was rumoured that the tickets and hotel fees for departing tours were not booked.
What about the guarantors?
The two directors are South Koreans (husband-and-wife), also Singapore PRs, staying in a rented apartment. Their combined NOAs is less than $100k/year. I doubt there is sufficient assets to satisfy creditors. Also, the directors are currently uncontactable.
No resolution in sight
I think the situation is very bleak. Travel agency license revoked, customers being referred to insurer or Small Claims Tribunal, purchased travel packages not honored, short-term debt obligations unmet, uncontactable directors, few assets to seize. Will professional debt collectors or bankruptcy proceedings work? Probably not. Will social deterrence work? Probably not, as the directors and their family may have already left the country. Even if they remain in Singapore, the revocation of license and negative publicity would have killed the business altogether. Unlike the Beauty Salon default, I don’t see how any restructuring can save S Travel (and their creditors). I hope I’m wrong.
Latest update (2-April-2016): http://www.straitstimes.com/singapore/300-left-in-the-lurch-as-travel-agency-s-travel-goes-bust