Singapore police probing troubled giant oil trader Hin Leong

THE Singapore police has launched an investigation into the city-state's giant oil trader Hin Leong Trading (HLT), as the debt-hit firm seeks a standstill from over 20 creditors to restructure whopping debts of US$4 billion.

In response to a query from The Business Times (BT) on Monday, the Singapore police force confirmed that investigations are ongoing.

According to sources, the probe follows a report lodged by HLT's creditor bank as the commodity trader faces mounting claims from creditors and clients after oil prices tanked and resulted in a crippling cash crunch.

BT reported on Monday, citing sources, that HLT suffered some US$800 million in losses from futures trading over the years that were not reflected in its financial statements. For the year ended October 2019, HLT reported positive equity of nearly US$510 million and a net profit of US$78 million.

It is also understood that PwC - HLT's financial adviser for the debt revamp - is conducting a review of the trader's financial position including certain "unusual significant payments and trades".

Rajah & Tann is HLT's legal adviser.

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Last week, Hin Leong Group's founder and key man, Lim Oon Kuin or OK Lim - an icon in the Republic's mammoth oil trading, blending and storage sector - stepped down from his positions at HLT and another unit, Ocean Tankers, to facilitate the debt revamp efforts. The fallout has spilled over to the group's other businesses, with Ocean Tankers, Singapore's leading tanker manager, being the most seriously hit.

HLT has filed an application in Singapore's High Court for a debt moratorium. There are 23 banks exposed to HLT, including Singapore's big three which have a combined exposure of at least US$600 million.

Pressure started piling on HLT after several banks - hit by defaults by other oil traders - pulled the plug or cut credit facilities to the firm.

HLT is a major oil trader in the region and for its capital-intensive business model to work, credit facilities are deemed its "lifeblood", a source said.

The historic crash in oil prices has deepened the cut. A trade cycle of up to 60 days or more for HLT to convert expenses - such as the purchase price, freight, storage and manufacturing costs - into revenue exposes the firm to the sharp swings in oil prices, sources told BT, citing documents.

As margin calls by banks intensified in March and April, the firm was compelled to sell the oil which drained its cash position. By the time the trade financing loans came due, HLT ran out of cash.

The group's financial distress follows widespread lockdowns on the back of the Covid-19 outbreak that has led to a plunge in demand and activity in the oil sector.

Desperate for funds, the group has been in talks with prospective buyers to sell its prized asset Universal Terminal (UT), BT reported. Hin Leong Group owns some 40 per cent in UT - a commercial storage facility on Singapore's Jurong Island - while China oil giant PetroChina owns 25 per cent and Macquarie Asia Infrastructure Fund (MAIF) holds the remaining stake.