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Interim JMs raise doubts over Ocean Tankers' exposure to nearly US$1b of potential claims

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For a majority of its trades, Hin Leong Trading nominated vessels chartered or operated by Ocean Tankers, which in turn issued bills of lading.

Singapore

THE interim judicial managers of Ocean Tankers Pte Ltd - a troubled unit of the crumbling Hin Leong empire and one of the world's largest operators of oil tankers - have raised doubts over the firm's exposure to nearly US$1 billion of potential claims involving bills of lading (BL).

These involved 42 transactions allegedly issued by Ocean Tankers on BLs related to particular voyages that had not taken place or did not correlate to relevant cargo for the relevant vessel, according to the preliminary findings of Ernst & Young's Angela Ee and Purandar Rao, the shipping giant's court-appointed IJMs.

Preliminary investigations have also shown that often, the operator of the vessel and/or the master of the vessel were unaware of the existence of the BL, according to the report that was filed on Tuesday with the Singapore High Court.

Ocean Tankers' JM hearing is scheduled for July 27.

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These initial findings related to potential claims of some US$984 million represent a much smaller amount than the US$2.67 billion figure that Ocean Tankers director Evan Lim Chee Meng had earlier cited in his affidavit in terms of potential exposure to claims as a result of the trouble brewing at its sister firm, Hin Leong Trading (HLT).

For a majority of its trades, HLT - the city state's oil trader that is tottering on nearly US$4 billion debt and is also under IJM - had nominated vessels chartered or operated by Ocean Tankers which in turn had issued BLs for the trades.

Mr Evan Lim is son of Hin Leong founder Lim Oon Kuin, better known as OK Lim, who stepped down as director and chairman of Ocean Tankers and HLT in April as signs emerged that the company was in choppy waters amid an oil crash.

The shareholders of Ocean Tankers which operates a fleet of 160 vessels, are Mr OK Lim and his daughter Lim Huey Ching.

The IJMs have also spotted payments of some US$19 million to the Lim family as a repayment of shareholders' loan shortly before Ocean Tankers filed for a debt moratorium and the IJMs were appointed.

They pointed out that the shareholders' loan account was classified as a capital reserve in the equity section of Ocean Tankers' balance sheet in the audited accounts for the year ended March 31 2019 and hence, alleged that the payments constitute "unfair preferences".

They have issued letters to the Lim family and legal advisers demanding repayment of the monies to Ocean Tankers.

According to the report, the IJMs have been engaging the Lim family in "various discussions" on the future business relationship between Xihe Group - the company, also controlled by the Lim family, owns nearly all the vessels operated by Ocean Tankers - and the ship charterer.

Further, the IJMs wrote to the Lim family on July 1 to initiate discussions on whether they would support any future restructuring to preserve some or all of Ocean Tankers' business and its debt restructuring.

They have put forward two options to the family which include splitting the business essentially into ship chartering and management, and oil storage and lubricant processing or as suggested by HLT's IJMs in their report, restructuring the key entities of the empire into an integrated petroleum trading platform.

"The Lim family responded on 6 July 2020 to say that they are prepared to meet in the week commencing 13 July 2020 subject to certain conditions. The IJMs are in the course of responding and making arrangements for the proposed meeting," said the report.

In terms of prospects, the IJMs concluded that Ocean Tankers has sufficient cash resources to continue trading for at least the next three months which provides sufficient time to formulate a potential restructuring plan. The IJMs said they will also step up talks with parties who have expressed interest in the lube plant, storage and terminal facilities.

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