Energy giants Vitol, Sinopec eye Hin Leong's oil storage terminal

Singapore

AS Singapore's Hin Leong grapples with a debt fallout of nearly US$4 billion and a police probe into the company, its oil storage terminal on Jurong Island that is the size of 60 standard football fields is fast becoming a coveted asset.

The latest to be drawn to Universal Terminal (UT) is energy and commodities giant Vitol Group, according to sources. Industry watchers say part of the attraction of UT may be related to Vitol's part-owned global storage terminal owner and operator VVTI.

Vitol joins several other industry titans in the early stages of exploring a UT stake purchase. The parties reportedly include China's state-run Sinopec - the world's largest refiner by capacity.

UT is 41 per cent owned by the family of Lim Oon Kuin or OK Lim - Hin Leong's founder - while China's oil giant PetroChina and Australia's Macquarie Asia Infrastructure Fund own 25 per cent and 34 per cent respectively in the storage terminal. It is understood the two non-selling shareholders have the right of first refusal for UT although this could not be ascertained.

Sources said UT's appeal to potential buyers is that it is deemed "outside the tree" of Hin Leong's conundrum.

"UT is kind of shielded from this storm," said a source close to the company, referring to Hin Leong's financial troubles and the authorities' probe into the trading firm.

The Hin Leong empire, led by billionare OK Lim, spans oil trading, the business of chartering oil tankers - with a fleet of over 100 tankers, it is one of the largest owners in the world - and a bunkering services firm that last year was Singapore's third largest.

Hin Leong Trading (HLT), the Lim family's flagship company and one of the largest oil traders in Asia-Pacific, is at the epicentre of the group's debt dilemma. Its troubles erupted following margin calls by banks and lenders pulling the plug on credit facilities - the trader's lifeblood - amid jitters led by an oil rout.

"I can't see anyone not bundling UT into any solution for the group," said a market watcher. "For potential buyers, it is about how they can bring value into the play."

For long, UT has been a prized asset of the group. In 2013-2014, there were big plans to list the terminal as a business trust on the Singapore Exchange and raise some S$1 billion, but a commodity downturn put paid to such plans. Instead, Australia's Macquarie stepped in to pick up a slice of UT a year later.

For Vitol, UT is not its first stab at a distressed asset in the city state. Three years ago, the world's largest oil trader scooped up the US-focused oil trading business of then-Singapore-listed commodities trader Noble Group that was plunged into crisis by a sector downturn and fraud allegations.

It has been shopping around in the world's top bunkering port (Singapore) as well. Just this month, it added local bunkering firm Sinanju Tankers Holdings - the city state's 14th largest bunker supplier by volume.

Meanwhile, HLT is withdrawing its application to the court for a debt moratorium that was filed a week ago and instead, has filed for judicial management with PricewaterhouseCoopers (PwC) as interim judicial manager. The hearing date for the applications have been set for April 30, according to the hearing list on the Supreme Court website.

It is understood the decision for HLT to go down the JM path was led by bankers as there was a preference for the judicial manager (as opposed to the company's existing management) to run the show, particularly after it came to light that HLT had hid from its financial statements some US$800 million in losses incurred from futures trading.

Last week, Mr OK Lim stepped down from all executive roles in the group's key entities including HLT and Ocean Tankers. In the court documents seeking a debt moratorium, he added that his son, Evan Lim Chee Meng and daughter Lim Huey Ching, both of whom are directors of HLT, were committed to rescuing the firm.

Both his children also run UT.