According to sources, the founder of Singapore oil trading company Hin Leong Trading (Hin Leong) said that around US$800 million (S$1139.38 million) of incurred losses in futures trading have been hidden by the company. This suggests a larger financial mess than expected before, the sources added.
Last week, the company filed for court protection from creditors as they hired Rajah & Tann as legal counsel to deal with its lenders, the sources said.
Several lenders stopped providing their line of credit in early April due to worries over Hin Leong’s ability to repay its debt as the company experienced financial trouble. Almost US$4 billion (S$5.70 billion) was said to be owed by the oil trader to more than 20 banks.
The COVID-19 pandemic and the Saudi Arabia-Russia price war have caused oil prices to slump which in turn worsened the fallout of the company. The oil trading community in the country also felt the ripples from Hin Leong’s debt crisis as the country is one of the world’s largest ship fuelling centre and most important oil markets.
The sources, citing an email dated 17 April sent by the shipping affiliate of Hin Leong to notify the proposed moratorium proceedings to recipient parties. The sources noted that Lim Chee Meng, who is the only son of founder Lim Oon Kuin, said that some of the millions of barrels of refined products used as collateral for getting loans from its banks were sold.
As a consequence, Hin Leong has a shortfall between the inventories owed to it banks and the oil stocks it owned. Because the collateral no longer provides guarantee, the banks could suffer billions in loan losses.
Founder Lim Oon Kuin’s son, also known as Evan Lim, stated that he was not aware of why the losses occurred during some years and that the company’s finance department had been instructed by his father to omit those losses from the financial statements. This is based on sources who know about the email that was signed by Lim Chee Meng and his sister Lim Huey Ching, and sent by Ocean Tankers Pte Ltd.
On Sunday, both the father and son could not be reached for comment. Similarly, calls or emails to Hin Leong or Ocean Tankers were without responses. The law firm cannot comment on the issue as it is before the court, according to a spokeswoman for Rajah and Tann.
The company’s trouble is the most recent on to assault to commodity trading community in the country, which is one of the biggest hubs besides Houston, London and Geneva. For the past three years, other big companies in the industry also collapsed, such as Agritrade, Noble Group and a rogue trader incurring losses in the millions.
On Friday (17 April), both Hin Leong and Ocean Tankers filed for court protection from creditors as the former is unable to repay its debt. The Lim family solely owned both companies.
In the period ended 31 October, a net profit of US$78 million (S$111.08 million) and a positive equity of US$4.56 billion (S$6.49 billion) was recorded by Hin Leong, according to anonymous sources.
Based on the presentation screenshots to a group of bankers seen by Bloomberg News, the company told its lenders that this month that its assets were only US$714 million (S$1.0168 billion) with total liabilities at US$4.05 billion (S$5.77 billion) as of early April. With this, the deficit is at least US$3.34 billion (S$4.76 billion).
The balance sheet cautioned that “figures obtained from the company are subject to verification” as no equity was shown at all as of 9 April.
Deloitte & Touche LLP audited the most recent accounts of Hin Leong Trading for the financial year which ended 31 October. The sources familiar with the issue noted that the auditor did not single out any problems. Deloitte’s Singapore office could not be reached on Sunday for further details.
The creditors were told by the company that it only owned US$141 million (S$200.69 million) worth of oil products inventory, as opposed to the US$1.28 billion (S$1.82 billion) declared in its October 2019 audited statement. Compared to the US$461 million (S$656.14 million) in cash owned by Hin Leong in October, it only had US$50 million (S$71.17 million) in cash as of this month,
On Tuesday (14 April), a virtual meeting was held by a group of 10 lenders which also include Standard Chartered, Deutsche Bank and Singapore’s three biggest banks, with the oil trader and its advisers. The banks had earlier refused to comment on the issue.
Last week, the sources pointed out that HSBC has the largest exposure to Hin Leong at around US$600 million (S$853.98 million). On the other hand, DBS Group has an exposure of around US$300 million (S$426.99 million) whereas United Overseas Bank and Oversea-Chinese Banking Corp are owed at least US$100 million (S$142.33 million) each respectively, sources said.
The company was founded in 1963 by Lim Oon Kuin, who is known to many in the industry as OK Lim. It has now become one of the biggest suppliers of bunkers or ship fuel.
According to the country’s Maritime and Port Authority, its bunkering arm, Ocean Bunkering Services was ranked the third-biggest shipping fuel supplier in the country in 2019. Its affiliate, Ocean Tankers boasts more than 100 oil tankers fleet.
The sources cited the email, stating that the founder resigned from all executive roles in Hin Leong and related companies from 17 April onwards. He will also resign from Managing Director and Director positions at Ocean Tankers.