An Update on Beehive’s First Default

This summer we were first to identify the UAE’s first p2p default on the Beehive platform which occurred on 15th August 2016. Four months later Beehive have finally updated investors as to the status of the AED 350,000 loan its investors made to Radiant Engineering, a renewable energy contracting firm.

As per previous communications Radiant Engineering FZC did not make its installment payment on 16 July 2016 and has missed all subsequent installments. We have been working closely with the business owner to assist him restart the business and therefore commence repayments of Beehive’s finance. The owner has restructured his large creditors (the freezone and key bank lines) and we have seen proof of this and the office will be reopened next week. The business has been closed for nearly 6 months and the owner needs to complete orders and obtain payments so that Radiant can restart monthly installment repayments. The owner has agreed repayments of the bank loans to commence in April 2017 and it looks likely that this will also be when Beehive repayments will start again. The owner has agreed that all investors will be made good for the time during which the loan has been on a standstill and an additional interest payment will be made on restarting monthly repayments to reflect this.

A couple of observations.

1. It’s very clear that the seniority of the loan that Beehive originated is below that of bank debt. The mention of “freezone and key bank lines” presumes that Radiant may have outstanding dues to the Sharjah Airport International Freezone (SAIF) in which it’s based. Our assumption is that Beehive’s unsecured loan is probably just before equity holders, with little to no recourse to any of Radiant’s assets (be they fixed or receivables).
2. There’s been no disclose of just how Radiant is going to get itself out of trouble. Apparently it’s just needed a bit of time to get things in order (9 months). One wonders as to the level of diligence that Beehive actually carried out, particularly when it comes to cash-flow management.

There isn’t much else to go on at this point. One risk we think is material is should Radiant’s clients smell blood. If clients suspect that Radiant may cease trading just 4 -5 months from now, they may just hold out on the hope that the company goes bust before they pay Radiant for work completed.