End of road for Singapore's Hin Leong as court grants winding up order

IT's the end of passage for collapsed oil trader Hin Leong Trading (HLT) after the Singapore High Court on Monday granted an order to wind up the debt-roiled firm that was brought to its knees by last year's oil slump amid the spectre of fraud allegations.

This follows an over two-hour long hearing via Zoom before High Court Justice Kannan Ramesh on an application filed last month by HLT's judicial managers (JM) to wind up what was once an iconic oil empire founded by Singapore tycoon Lim Oon Kuin after a hunt over several months for potential investors to save the group failed.

The firm's JMs - Goh Thien Phong and Chan Kheng Tek of PricewaterhouseCoopers (PwC) - also got their wish to be appointed as HLT's joint liquidators. Following that, the JM order was discharged.

HLT's JMs moved to wind up the firm on the basis that it was "clear and undisputed" that it was unable to pay its debts. As at end-October 2020, the company had assets with an estimated realisable value of US$273.28 million and total debt of US$4.59 billion, according to court filings.

The latest development underscores the difficulty in restructuring a giant entity during an oil downturn and more so, amid a shocking scandal involving the firm's founder. The JMs had originally planned to rehabilitate the firm by pitching its appeal to potential investors as an integrated oil platform.

The court-appointed managers, who were represented by Patrick Ang of Rajah & Tann Singapore, were earlier much more optimistic. When the elder Lim also known as OK Lim and his children Lim Chee Meng and Lim Huey Ching moved to discharge the company's JMs last October and applied instead to wind up the firm, the JMs deemed the move as "premature" and sought more time to receive expressions of interest from various parties.

Court documents revealed that there were initially four potential investors and this had whittled down to three, for the assets of HLT as well as sister companies Ocean Tankers Pte Ltd and XiHe Holdings, respectively fleet managers and owners. But these potential investors seemed more interested in the individual companies and not the trading company and hence, dashed any hope for a holistic restructuring.

"Prolonging the search (for investors) would necessitate spending more time and costs on the exercise," the court-appointed managers submitted.

While the JMs said they were unable to disclose the identities of the potential investors, previous court documents indicated that they were in talks with China's state-owned enterprises and other companies involved in the oil and gas business as well as regional and global oil traders.

The Lim family applied to wind up the firm on the basis that the JM process was unlikely to result in a more advantageous realisation of the company's assets as opposed to a winding up and hence, would not serve creditors' interest.

The family however objected to the JMs being appointed as liquidators and proposed instead for Henry Tan Song Kok and Chan Yee Hong from Nexia TS as the firm's liquidators.

The family's legal representative Jaikanth Shankar of Davinder Singh Chambers LLC argued that the appointment of the JMs as liquidators would result in a conflict of interest as they would not be able to comment fairly on the JMs' fees and if needed, robustly argue for a fee reduction if they are deemed excessive.

Based on court documents, HLT's JMs estimated that they and their lawyers incurred costs of some S$17.3 million for both the interim JM and JM periods from April last year to February this year. The JMs submitted that there is no conflict as the fees will be reviewed by the court as well as the creditors.

In the liquidation application, the JMs applied, and were granted by the court, for the fees and expenses which have not yet been approved by the court, to be charged as an expense of winding up.

The Lims also opposed the appointment of Mr Goh as liquidator as he was leaving PwC and they doubted whether he will be able to fully discharge his duties as a liquidator. This could also result in unnecessary costs and expenses, they claimed.

Although Mr Goh will be leaving PwC to set up his own firm ahead of reaching PwC's retirement age soon, he will continue to work seamlessly with the firm, the JMs submitted. They also said that PwC will continue to provide Mr Goh full access to both the professionals and staff of PwC to support him as one of the liquidators.

At the end, the JMs got their way.

The troubles at Singapore's iconic oil empire led by Mr Lim Oon Kuin had stunned the tight-knit oil and shipping milieu last year following a historic crash in oil prices on the back of a demand shock wrought by the Covid-19 pandemic which was worsened by a price war between two oil majors.

The fallout deepened after it emerged that HLT hid hefty losses incurred from futures trading in its books and later, fraud allegations against the Lims by the court-appointed managers of HLT.

READ MORE: How it all went south for Hin Leong