OCBC files application to place OK Lim's Xihe Group under interim judicial managers

Singapore

OCBC Bank has filed an application to appoint judicial managers over Xihe Holdings and four of its vessel-owning subsidiaries, citing "strong distrust" in Xihe's current management after evidence of fraud was uncovered at sister company Hin Leong Trading in April.

Xihe is an exempt private company owned by Hin Leong founder Lim Oon Kuin, better known as OK Lim; and his son, Evan Lim Chee Meng. Hin Leong was one of Singapore's biggest shipping-fuel suppliers before it went insolvent.

Its collapse resulted in another Lim family business, Ocean Tankers, being placed under interim judicial managers (IJMs) as well.

The elder Mr Lim has since admitted to improper financial reporting at Hin Leong over a period of years, and these "serious irregularities" extend to the affairs of the Xihe Group as well, OCBC Bank said.

"Especially in light of the interlinked businesses, common ownership and leadership of the (Xihe Group), Hin Leong and Ocean Tankers, IJMs need to be appointed urgently over the debtor companies to investigate the serious irregularities and prevent further prejudice to creditors," the bank wrote in an affidavit filed with the Singapore High Court on Monday, seen by The Business Times.

OCBC Bank has applied for Seshadri Rajagopalan and Paresh Jotangia of Grant Thornton Singapore to be appointed as IJMs for Xihe Holdings and four of its subsidiaries, namely Da Xin Tankers, Hua Guang Shipping, Nan King Maritime and Hua Xin Shipping.

"The Xihe subsidiaries have persistently failed to seek and collect payments from Ocean Tankers for months or years, to the prejudice of creditors of the Xihe Group and in breach of contractual obligations owed to OCBC," the bank wrote.

The Xihe Group and Xihe Capital had also transferred some US$208.1 million to Hin Leong (via Ocean Tankers) "for no valid commercial purpose", while bareboat charters of OCBC-financed vessels were terminated without OCBC's consent, it said.

The bank further noted that Lim family members who own and manage the Xihe Group caused the billion-dollar insolvencies of Hin Leong and Ocean Tankers by allegedly fabricating fictitious gains, forging documents on a massive scale, misusing secured inventory and misleading banks into extending financing to Hin Leong.

"The Lims further paid themselves dividends of US$30 million in 2017 and US$60 million in 2018 from Hin Leong where there were no profits to support such dividends, and withdrew US$19 million from Ocean Tankers shortly before filing scheme moratorium proceedings," OCBC Bank said.

For these reasons, "OCBC strongly distrusts the current management... or any management appointed by the (Xihe Group) or the Lims," it said. "The appointment of independent JMs and IJMs would help greatly in restoring confidence of potential investors."

OCBC Bank added: "Vessels owned by the Xihe Group have already been subject to numerous writs, with the majority of the fleet idling in international waters, costing a fortune in lost income and expenses daily. A moratorium would give the debtor companies the time and breathing space to properly restructure the debts, and better preserve value of the vessels."

Officers from PricewaterhouseCoopers (PwC), the IJMs for Hin Leong, had opined in June that Hin Leong has "no reasonable prospect" of being rehabilitated as a standalone company, though it may have a shot at survival if the Lim family supports the process by committing their other family assets to the restructuring.

Certain parties have expressed interest in acquiring shares in or assets owned by the Xihe Group or Ocean Tankers, PwC said.

However, it is not yet clear if the Lim family will go with this option. The family hired Davinder Singh Chambers and nTan Corporate Advisory as its legal and financial advisers in May.