Singapore oil trader Hin Leong meets banks over finances: sources

[SINGAPORE] Singapore oil trader Hin Leong held a call with creditors on Tuesday after banks failed to provide a letter of credit to the trading firm to purchase at least one cargo of oil products due to load this month, four sources said.

The global coronavirus pandemic has led to an unprecedented slump in fuel demand and hammered oil prices, making it difficult for trading firms to make a profit. Hin Leong is one of the largest fuel traders in Asia and an operator of a major tanker fleet.

Several banks which offer credit facilities to Hin Leong held a call with the company and its advisers on Tuesday, three sources with knowledge of the matter said. The meeting was to discuss ways to provide short-term trade finance for the firm to continue trading operations, the sources said.

"Things are heading in a positive direction but it will take some time," said one of the three people with knowledge of the call.

Hin Leong did not answer emails and telephone calls from Reuters seeking comment.

According to a Bloomberg report quoting sources, banks have a combined exposure of at least US$3 billion to the privately-held oil trader. The group of lenders including HSBC Holdings, DBS Group Holdings and OCBC, held a virtual meeting with the trader and its advisers, according to the people. As many as 10 banks are involved, according to one of the people. HSBC has the biggest exposure at about US$600 million, they said.

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The company has appointed accounting firm PwC and law firm Rajah & Tann as its advisers for its negotiations with banks, two sources said.

Rajah & Tann declined comment and PwC had no immediate comment.

Letters of credit are the tool used to guarantee payment to a counterparty for the purchase of a cargo. Without them, companies struggle to trade.

The firm was unable to provide a letter of credit from a bank for an oil product cargo it contracted to buy in April, said one Singapore-based source with direct knowledge of the matter.

"Everyone is worried (about payment) and they don't dare to let Hin Leong to lift the cargoes," he said.

A source at a Singapore-based trading firm said on Tuesday his firm had mutually agreed with Hin Leong to cancel a transaction for another oil product cargo loading in April due to concerns over the company's credit.

Hin Leong, started in 1963 by Singapore billionaire Oon Kuin Lim, better known as O K Lim, is a major trader of oil products, and owns a fleet of more than 100 vessels through its Ocean Tankers arm.

It also partly owns Singapore's Universal Terminal and owns Ocean Bunkering Services Pte Ltd, one of the island state's largest marine fuel suppliers.

A source at another Singapore-based trading firm said his company was approached by a bank over the weekend to buy a cargo that the bank was selling on behalf of Hin Leong. He declined to give further details.

Separate sources at two Singapore-based firms that deal with Hin Leong and are waiting on letters of credit for cargoes of oil products they are contracted to sell to the company but have yet to deliver said they were waiting for an update on Hin Leong's financial status.

"We're worried but there are still some days to go before the loading schedule," one of the sources said. "Given the prior record of Old Lim, we could wait until one day before loading."

Hin Leong has contracted to buy over two million barrels of gasoline from a range of major oil companies to load in April, trade data showed, along with about one million barrels of jet fuel, two million barrels of gasoil and 300,000 tonnes of fuel oil.

REUTERS, BLOOMBERG