HSBC targets Singapore oil trader as loan concerns escalate

Singapore

HSBC Holdings filed an application at Singapore's High Court this week to put ZenRock Commodities Trading Pte Ltd under judicial management, said people with knowledge of the situation. The bank has also proposed that KPMG lead the process.

HSBC and other banks are stepping up efforts to avoid further losses after the failure of Hin Leong, the storied Singapore oil trader that owes 23 banks almost US$4 billion. HSBC has the most exposure to the oil trader, at US$600 million, under its global oil-trading portfolio of US$2 billion. Its ZenRock credit is less than US$55 million, said the sources.

HSBC declined to comment; ZenRock could not be reached despite multiple attempts.

A pre-trial conference has been slated for June 11, said the sources, who requested anonymity as the matter is private.

In response to market speculation over its financial status, ZenRock resaid last month that it is not under statutory restructuring or insolvency protection. The Singapore-based company is operational and is working with other creditor banks to negotiate a consensual restructuring, said a source.

ZenRock has trade financing facilities with other lenders aside from HSBC, including Natixis and Oversea-Chinese Banking Corp, said the company's profile at the Accounting and Corporate Regulatory Authority.

Representatives for these banks declined to comment. ZenRock has repaid debts owed to ABN Amro Bank as of April 23, according to filings to Singapore's accounting regulator.

The ZenRock case underscores the mounting tensions between traders and banks, all suffering from a combination of plunging oil prices and an historic slump in crude demand due to the pandemic. Banks traditionally offer credit lines in trade finance deals, the lifeblood for the global commodities trading industry that moves cargoes of food, metals and fuel every year.

The collapse of Hin Leong came just weeks after banks moved against another Asian trading house, Agritrade International. Hontop Energy, an oil trader linked to a Chinese refiner, entered receivership around the same time, blaming cratering demand on the coronavirus pandemic.

The scandals are happening against a backdrop of the most volatile, unprecedented oil-price swings in history. West Texas Intermediate futures traded negative for the first time in April, which complicates the ability of traders and banks to hedge transactions.

ZenRock was set up in 2014 in Singapore by a group of veteran oil traders including Xie Chun and Tony Lin. The company traded more than 15 million tons of oil and petroleum products last year, said its website. Its business spans from trading to risk management and market research, and it has offices in Singapore, Shanghai, Zhoushan and Geneva. The firm posted revenue of US$6.15 billion in 2018, compared with US$1.24 billion in 2016, said its latest available financial statement. BLOOMBERG