Troubled Hin Leong's Ocean Tankers granted interim judicial management

SINGAPORE's largest oil tanker operator Ocean Tankers Pte Ltd, part of the troubled Hin Leong empire, was granted interim judicial management (IJM) by the Singapore High Court on Tuesday.

The Business Times understands that the court has appointed Ernst & Young's Angela Ee and Purandar Rao as the interim judicial managers for the shipping giant.

Based on court documents, Ocean Tankers is exposed to claims that could hit US$2.07 billion; these involve bills of lading after Hin Leong Trading (HLT), its sister company, hit troubled waters.

Sources said more than 35 "interested parties", mostly creditors, were present at Tuesday's virtual hearing, which lasted about three hours and was heard before High Court Judge Kannan Ramesh.

This comes two weeks after the court granted HLT's IJM application and appointed Goh Thien Phong and Chan Kheng Tek of PricewaterhouseCoopers Advisory Services as interim judicial managers.

The interim judicial managers have eight weeks to file a preliminary report, which will include an assessment of whether Ocean Tankers can be restructured or rehabilitated.

Ocean Tankers, which operates over 150 vessels, including very large crude carriers (VLCCs), and is one of the world's largest oil-tanker firms, is led by chief executive Evan Lim Chee Meng, the son of Hin Leong's founder, the low-key tycoon Lim Oon Kuin better known as OK Lim.

The company counts oil majors Exxon Mobil, Shell and BP as well as giant traders such as Vitol, Lukoil and Glencore as customers.

The cash woes of HLT, Singapore's largest oil trader with debts of nearly US$4 billion, have rocked Singapore's tightly-knit commodity trading circles.

One long-time maritime specialist said: "No one else is bigger than him (OK Lim). For a lot of bunker suppliers and oil traders, he is a big brother who is now in trouble. The amount of debt has shocked the sector."

HLT's headache is also Ocean Tankers, not least because the businesses are deeply interconnected. HLT had nominated vessels chartered or operated by Ocean Tankers for a majority of its trades. In turn, Ocean Tankers had issued bills of lading for the carriage of cargoes in relation to the trades, court documents revealed. All that started unravelling when HLT became cash strapped amid margin calls, and as banks pulled the plug on credit lines - the lifeline of the capital-intensive business; this followed the crash in oil prices as the Covid-19 pandemic slashed energy demand.

In his affidavit to support Ocean Tankers' judicial management (JM) application, Mr Evan Lim said Ocean Tankers will be unable to pay its debts if there are demands from holders of the bills of lading - be it the banks who financed the cargo or buyers or sellers of the cargo.

Also, most of Ocean Tankers' fleet of vessels are bareboat chartered from Xihe Holdings and its units, which are fully owned by the Lim family. Mr Evan Lim said the entities under Xihe Group are Ocean Tankers' major creditors, with some US$314 million owing including some US$208 million in company loans.

Both HLT and Ocean Tankers had earlier in April sought a six-month debt moratorium from the court, but withdrew the applications. Instead, they filed for JM when creditors pushed for a court-supervised restructuring after it came to light that HLT had hid US$800 million in losses (incurred from futures trading) from its financial statements.

Singapore's Commercial Affairs Department has launched a probe into HLT.

Mr Evan Lim said in the company's application that the JM would give comfort to the market in dealing with Ocean Tankers as the management would be in the hands of court-appointed officers, and "thus avoid the perception of being linked to financial troubles of HLT".

However, he said that while the shipping firm's business will be better able to continue under the moratorium accorded by the JM regime, the business may not return to levels before the onset of the Covid-19 pandemic.

He added that it will be difficult to "completely shake off" the market perception of Ocean Tankers' links to HLT's troubles.

As the shipping firm may not be able to fully meet all operational costs and expenses, he added that Ocean Tankers was mulling the sale of some non-core vessels to raise cash.

Rajah & Tann is the legal adviser to both HLT and Ocean Tankers.

Meanwhile, BT understands that Mr OK Lim has hired Senior Counsel Chelva Rajah; his children Mr Evan Lim and daughter Lim Huey Ching, who are HLT directors, have hired Senior Counsel Kenneth Tan to represent them in the negotiations with creditors.

BT further understands that Ocean Tankers is also seeking the JM application and protection from any charge or claims during the JM process to be extended to the company's property outside Singapore. This, said a source, was a late addition in the company's JM application and the court made no order on the matter.