Singapore's Hin Leong May Have Knocked Société Générale Out Of the Commodity Financing Business

Singapore is going to suffer a bit of reputational damage after this fraud and ZenRock and a couple others.
From ZeroHedge:

SocGen Reportedly Ends Commodity-Financing Biz After $240 Million Loss In Asian Oil-Trading Giant Bankruptcy

After pointing out the perplexing lack of high-profile blow-ups in the current commodity crush (as a reminder back in 2016 when oil dropped less than it has now, the Glencores and Trafiguras of the world were this close to collapse), we reported less than a month ago that one of Singapore's biggest and most iconic - and extremely secretive - oil traders, Hin Leong Trading, whose website reports revenue surpassed $14 billion all the way back in 2012, filed for bankruptcy protection after, according to a Bloomberg report, the son of the "legendary" founder of Hin Leong said the Singapore oil trader hid about $800 million in losses racked up in futures trading.

At the time we warned that potentially means huge losses for the banks which provided the merchant with billions in loans as the collateral they thought they have as a guarantee isn’t there. Altogether, Hin Leong is said to owe almost $4 billion to more than 20 banks including HSBC (which said it booked a substantial loan loss provisions from an exposure to oil traders), who will now scramble to figure out just how massive their loan losses are.

And now, as Bloomberg reports, we see the first real victim as Societe Generale is halting fresh funding to oil trading firms in the Asia Pacific region and reviewing its activities globally after taking a large hit because of the collapse of the Singapore giant.
According to people with knowledge of the matter, Bloomberg notes that the Singaporean company filed for creditor protection while owing the French bank about $240 million leading it to reconsider its future business in commodities financing both in the APAC region and more broadly.

“Societe Generale doesn’t comment on market rumors but the bank reminds that Natural Resources financing is one of its core expertise,” the lender said in a statement.
“Societe Generale will remain committed to the Trade Commodity Finance sector, including in Asia.”

As we detailed previously, one unexpected consequence of the company's sudden bankruptcy, is that with a record 160MM barrels of oil loaded up on tankers to ease the global commodity glut, Singapore may suddenly lose its place as the world's tanker "parking lot." While traditionally Singapore has had massive spare oil storage capacity which explains photos such as shits one...

... it is Hin Leong's Universal Terminal that has storage capacity of 2.33 million cubic meters and is the largest independent petroleum storage terminal in Singapore and one of the biggest independent storage facilities worldwide. But now that the company is bankrupt, the ability of tankers to store their holdings in the terminal is suddenly in limbo, which means that storing oil on sea may suddenly become far more complicated....

....MORE

Previously:
April 22
"China’s Sinopec in talks to buy stake in Hin Leong’s Singapore terminal: Sources"
April 21
Shipping/Fuel: "Banks tighten credit on Asia oil traders as Hin Leong losses add to woes - sources"
April 20
FT Backgrounder On Singapore's Hin Leong Trading (and some MAJOR accounting issues)
April 20
"How an epic gamble exposed the rot inside O. K. Lim's Hin Leong oil trading empire"
April 20
India’s ICICI Bank Seeks To Impound Two Tankers Operated By Hin Leong Trading Subsidiary
April 19
Shipping/Fuel: Singapore's Hin Leong Trading Is Bankrupt, Probable Disclosure and Bank Fraud Issues (HSBC exposure $600 Mil US)
Apr. 16
Uh Oh: Singapore's Hin Leong Will Suspend Marine Fueling Operations As Soon As April 17
Apr. 15
Singapore's Hin Leong Still Fueling Ships, Rescue Complicated By $4.25 Billion Debt
Apr. 14
Singapore Oil Trader Hin Leong Trading Is On The Ropes With No Help From Bankers

Singapore: "One-third of Hin Leong founder's ships sold to repay debt, say sources" (so far)

 From The Straits Times:

Rest of the 150 ships owned by O.K. Lim's firms expected to be sold by late this year

About one-third of the roughly 150 ships owned by companies controlled by Singapore tycoon Lim Oon Kuin and his family have been sold as part of efforts to repay billions of dollars of debt owed to creditors, two sources told Reuters.

Accounting firm Grant Thornton, court-appointed supervisor of Xihe Holdings, put up several vessels for sale through ship brokers in September last year.

Xihe Holdings is owned by the Lim family and held the bulk of their fleet.

The rest of the ships are majority-owned by Xihe Capital - currently under liquidation according to Singapore business registry records - and 10 single purpose companies.

The ships owned by the Xihe group have been sold at prices of US$2 million (S$2.65 million) to US$3 million each for coastal barges and around US$30 million each for very large crude carriers, said the two sources.

Buyers include Greek ship owners, one of the sources said....

....MORE

There were so many parts to this story:
May 12, 2012
Singapore's Hin Leong May Have Knocked Société Générale Out Of the Commodity Financing Business
April 22
"China’s Sinopec in talks to buy stake in Hin Leong’s Singapore terminal: Sources"

April 21
Shipping/Fuel: "Banks tighten credit on Asia oil traders as Hin Leong losses add to woes - sources"
April 20
FT Backgrounder On Singapore's Hin Leong Trading (and some MAJOR accounting issues)
April 20
"How an epic gamble exposed the rot inside O. K. Lim's Hin Leong oil trading empire"
April 20
India’s ICICI Bank Seeks To Impound Two Tankers Operated By Hin Leong Trading Subsidiary
April 19
Shipping/Fuel: Singapore's Hin Leong Trading Is Bankrupt, Probable Disclosure and Bank Fraud Issues (HSBC exposure $600 Mil US)
Apr. 16
Uh Oh: Singapore's Hin Leong Will Suspend Marine Fueling Operations As Soon As April 17
Apr. 15
Singapore's Hin Leong Still Fueling Ships, Rescue Complicated By $4.25 Billion Debt
Apr. 14
Singapore Oil Trader Hin Leong Trading Is On The Ropes With No Help From Bankers 

February 2021
Singapore: An Infrastructure Asset The Chinese Won't Be Getting, Jurong Port to take over O.K. Lim family's stakes in Universal Terminal
January 2021
How The Failed Bets Of Singapore's Hin Leong Trading Changed The Oil Industry Forever
Long-time readers figured out some time ago that we didn't have all those Hin Leong posts for grins and giggles. It was a big deal, bigger than I or anyone knew at the time and still expanding in its ramifications.

"China’s Sinopec in talks to buy stake in Hin Leong’s Singapore terminal: Sources"

Talk about a strategic asset, strategically locate: SINGAPORE, DO NOT ALLOW THIS!!

A couple days ago the Financial Times' Natural Resources editor posted the org chart for Hin Leong:

The Hin Leong business empire pic.twitter.com/o305B2OghZ

— Neil Hume (@humenm) April 21, 2020 

The terminal in question is over there on the right of the schematic. Macquarie Asia Infrastructure Fund is the 34% owner of what looks to be a very large tank farm and loading facility:

The corporate brochure says 2.33 million cubic meter capacity which, our handy calculator tells us, is 14.65 million barrels. Plus room for some big boats.
By comparison Cushing Oklahoma's capacity is only 5 times that (assuming effective capacity is 85% of 'shell' capacity).
And no big boats.

And from Reuters via CNBC:

• Hin Leong Trading owes a total of $3.85 billion to 23 banks and has applied to a Singapore court to delay its debt repayments, according to a Hin Leong presentation to lenders on April 14 contained in the court filing, which was reviewed by Reuters but has not been made public.
• Sinopec, Asia’s largest refiner, was approached by Hin Leong earlier this month to look at investing in the Universal Terminal in Singapore, said one Beijing-based Sinopec official.
• The sale could provide much needed cash for family-owned Hin Leong, one of Asia’s biggest independent traders.

Chinese state energy company Sinopec is in early-stage talks with Hin Leong Trading to buy a stake in an oil storage terminal that is partly owned by the Singapore trader, according to three sources with knowledge of the matter.

The sale could provide much needed cash for family-owned Hin Leong, one of Asia’s biggest independent traders.

The company owes a total of $3.85 billion to 23 banks and has applied to a Singapore court to delay its debt repayments, according to a Hin Leong presentation to lenders on April 14 contained in the court filing, which was reviewed by Reuters but has not been made public....

....MUCH MORE

Using the brochure's number for the cost of the terminal, $750 million the book value, pre-depreciation, represented by Hin Leong's 41% interest is $307 million. Whether the operations are kicking out any cash-flow is a mystery to me but we do know it was the trading arm that suffered the big losses.

How The Failed Bets Of Singapore's Hin Leong Trading Changed The Oil Industry Forever

Long-time readers figured out some time ago that we didn't have all those Hin Leong posts for grins and giggles. It was a big deal, bigger than I or anyone knew at the time and still expanding in its ramifications.

From Bloomberg via Yahoo Finance:

Wrong-Way Bet on Covid Is Changing Oil-Trading Industry Forever

In January, as a mysterious illness ripped through the Chinese city of Wuhan, global oil prices plunged. Two thousand miles away in the island state of Singapore, one of the most powerful men in the world of commodities trading, Lim Oon Kuin, quietly added to his vast stockpiles of fuel – making a bet that China would successfully control the spread of the new disease.

That gamble soured quickly. While China did curb the coronavirus at home, the pandemic that followed brought crude oil prices tumbling as much as 70%. Banks tried to recover loans from Lim’s company, Hin Leong Trading Pte, triggering one of the biggest scandals in the oil industry this century. Lim’s empire collapsed, owing $3.5 billion to 23 banks, and the fallout from the debacle is still reverberating into 2021, shaking out large tracts of the vast and often opaque $4 trillion global oil-trading industry.

The losers are likely to be the hundreds of small trading firms, many of them employing only a handful of people, who will find it expensive, if not impossible, to meet the increased demands for information from banks that have become wary of lending them money. Those gaining from the crisis are the big global trading houses such as Trafigura Group and Vitol SA, that retain the confidence of the finance companies and are better able to absorb the costs of increased oversight.

A sign of those changes came earlier this month when banks in the major oil trading hub of Singapore issued new guidelines for financing that could curb some of the practices that led to the shock from Hin Leong, whose creditors, including HSBC Holdings Plc. and Singapore’s DBS Group Holdings Ltd., are still fighting to recover funds.

Netherlands-based ABN Amro Bank NV has said it will pull out of commodity trade finance altogether, and others, including France’s BNP Paribas SA, said they were scaling back or reviewing their businesses. More than 20 veteran traders and industry bankers told Bloomberg News in interviews that financing for the industry is tightening, with the contraction likely to continue next year as bankers apply stricter standards or cut their exposure to smaller merchants.

“Banks have become more risk averse in this environment,” prompting them to focus on the large trading houses, said Steven Beck, Head of Trade & Supply Chain Finance at the Asian Development Bank. He said the Hin Leong crisis has made a deficit of trade finance worse.

The ongoing shake-up in the industry revolves around two financial instruments that enable the thousands of deals on which the global commodities supply chain relies — letters of credit and letters of indemnity. Trading companies offer cargoes and other assets to banks and finance firms as collateral to secure letters of credit as payment guarantees to their suppliers. The traders would also sometimes provide a letter of indemnity — a guarantee that they possess a cargo in lieu of shipping documents — to prove the authenticity of the trade.

Vanishing Cargoes

Such guarantees were central to the downfall of Hin Leong. In April, Bloomberg News was the first to report the financial difficulties at the company after some lenders had pulled credit lines amid concerns over Hin Leong’s ability to pay its debts. But by the time the bankers came calling for the pledged cargoes, at least 6 million barrels of oil and fuel weren’t there. Lim said he had secretly sold some of the barrels. Later, when sued by HSBC, Lim denied that he used forged papers to obtain financing, saying the documents were “mistakenly” issued.

An emailed inquiry seeking comment from the Lim family wasn't answered. DBS declined to comment. ``We remain committed to growing our business in Singapore,'' HSBC said in an email.

The scandal hit the industry hard. Banking revenues from commodity trade finance dropped 29% in the first half of this year, according industry consultancy Crisil Coalition.

Commodities traders typically thrive on wild price swings of the sort that accompanied the Covid-19 crisis. But this year, while bigger players have done well, many smaller firms are struggling to survive the fallout of Hin Leong and the geopolitical tensions underpinned by the virus and China’s trade dispute with the U.S....

....MUCH MORE

HT the story was out there: ZeroHedge.

Previously:
May 12
Singapore's Hin Leong May Have Knocked Société Générale Out Of the Commodity Financing Business
Singapore is going to suffer a bit of reputational damage after this fraud and ZenRock and a couple others....

December 16
A Strategic Asset: "Singapore port in advanced talks for Lim family’s terminal stake"
China's Sinopec was sniffing around this first-rate bit of infrastructure:...

Platts: "After Hin Leong: collapse of a Singaporean oil prodigy"

Unit of Singapore's Defunct Hin Leong Trading, Ocean Bunkering, Sees Licences Pulled, Ocean Tankers Wants To Give Up Ships

And many, many more. 

Unit of Singapore's Defunct Hin Leong Trading, Ocean Bunkering, Sees Licences Pulled, Ocean Tankers Wants To Give Up Ships

Two from Reuters via gCaptain, October 19:

Singapore Suspends Bunker Supply Licences of Hin Leong Unit

Singapore has suspended the licences to sell ship fuel held by a subsidiary of defunct oil trader Hin Leong Trading Pte Ltd since it could no longer meet the licensing requirements, the Maritime and Port Authority of Singapore (MPA) said on Monday.

The MPA suspended the licences for Hin Leong’s subsidiary Ocean Bunkering Services Pte Ltd (OBS), an agency spokesperson said in an emailed response to questions from Reuters sent on Oct. 12.

MPA typically issues licences to supply bunker, or ship, fuel to vessels and to operate barges to transport the fuel to the ships.

“Given that OBS has stopped its bunkering operations since April this year and has not been able to fulfil its licensing commitment to date, MPA has suspended their bunkering licences until further notice,” MPA said. The agency did not specify the exact date the licences were suspended.

In 2019, OBS was the third-largest bunker fuel supplier by volume in Singapore, which is the world’s biggest bunkering hub with about 50 million tonnes of annual sales volumes....MORE

And: 

Singapore’s Ocean Tankers Wants To Return Ships To Owners

The court-appointed manager for Ocean Tankers Pte Ltd has applied to the Singapore court to return most of the ships the company manages to the shipowners, as cash is running low and Ocean Tankers will not be able to maintain the fleet, two sources with knowledge of the matter told Reuters.

If successful, the move will allow Ocean Tankers, the chartering arm of embattled oil trader Hin Leong Pte Ltd, to resume its cash-generating business such as its oil lubricants business, for which a sales process is underway, the sources said.

Ocean Tankers, Hin Leong, Xihe Holdings and four special purpose vehicles all owned by oil tycoon Oon Kuin Lim and his son and daughter have been placed by the Singapore High Court under judicial management for restructuring after Hin Leong raked up nearly $4 billion of debt.

Ocean Tankers is spending $540,000 a day to maintain around 150 vessels, the sources said, citing judicial manager EY’s update sent to creditors and other stakeholders last week. Ocean Tankers had chartered these vessels, mostly owned by the Lim family, before it ran into financial problems.... MORE

We have quite a few posts on this multi-billion dollar mess:

Singapore's Hin Leong May Have Knocked Société Générale Out Of the Commodity Financing Business
Singapore is going to suffer a bit of reputational damage after this fraud and ZenRock and a couple others....

And MOST IMPORTANT:

"China’s Sinopec in talks to buy stake in Hin Leong’s Singapore terminal: Sources"
Talk about a strategic asset, strategically locate: SINGAPORE, DO NOT ALLOW THIS!!

A couple days ago the Financial Times' Natural Resources editor posted the org chart for Hin Leong in his Twitter timeline:

The terminal in question is over there on the right of the schematic. Macquarie Asia Infrastructure Fund is the 34% owner of what looks to be a very large tank farm and loading facility:

The corporate brochure says 2.33 million cubic meter capacity which, our handy calculator tells us, is 14.65 million barrels. Plus room for some big boats.
By comparison Cushing Oklahoma's capacity is only 5 times that (assuming effective capacity is 85% of 'shell' capacity).
And no big boats....

FT Backgrounder On Singapore's Hin Leong Trading (and some MAJOR accounting issues)

From the Financial Times, April 20: 

Hin Leong founder says $800m of losses not recorded

Inventory sale proceeds alleged to have been used as general funds even though they were part of bank deals

Neil Hume in London and Stefania Palma in Singapore

Hin Leong Trading, the Singapore oil trader that has filed for bankruptcy protection, suffered $800m of losses that were not reflected in its financial statements on the instruction of its founder Lim Oon Kuin. In a filing to Singapore’s High Court, Mr Lim said he had directed the company’s finance department not to disclose the losses, which were sustained in futures markets. 

“The payments made by HLT to satisfy margin calls made in respect of such losses were reflected as ‘accounts receivables’ and remained recorded as such after the losses were realised,” Mr Lim said in a signed affidavit seen by the Financial Times.

He also revealed that he had sold a “substantial part” of the company’s oil inventories and used the cash as general funds even though it was the subject of inventory financing agreements with banks. “As a result, there is a large shortfall of inventory as compared to the quantum of inventory which has been secured in favour of the bank lenders who had provided inventory financing,” said the affidavit....

....MUCH MORE

 

HT: the FT's Robert Smith:

And as I tweeted yday:

Hin Leong's accounts that have now been unveiled as fictitious? Deloitte signed them off LAST MONTH. pic.twitter.com/UeiaTQd70c

— Robert Smith (@BondHack) April 20, 2020

 

Recently:

Apr. 14
Singapore Oil Trader Hin Leong Trading Is On The Ropes With No Help From Bankers
Apr. 15
Singapore's Hin Leong Still Fueling Ships, Rescue Complicated By $4.25 Billion Debt
Apr. 16
Uh Oh: Singapore's Hin Leong Will Suspend Marine Fueling Operations As Soon As April 17

April 19  

Shipping/Fuel: Singapore's Hin Leong Trading Is Bankrupt, Probable Disclosure and Bank Fraud Issues (HSBC exposure $600 Mil US)

A Strategic Asset: "Singapore port in advanced talks for Lim family’s terminal stake"

China's Sinopec was sniffing around this first-rate bit of infrastructure:

The corporate brochure says 2.33 million cubic meter capacity which, our handy calculator tells us, is 14.65 million barrels. Plus room for some big boats.
By comparison Cushing Oklahoma's capacity is only 5 times that (assuming effective capacity is 85% of 'shell' capacity).
And no big boats.

Our comment at the time was "Talk about a strategic asset, strategically located: SINGAPORE, DO NOT ALLOW THIS!!"

 From Malaysia's The Star, December 17:

Singapore’s state-backed operator Jurong Port Pte is in advanced talks to buy a stake in a petroleum storage hub from the family behind collapsed oil trader Hin Leong Trading Pte, according to sources.

The deal is for the roughly 40% stake in Universal Terminal held by the Lim family, the sources said.

The sale would still need to win support from Hin Leong’s creditors, a source said.

It is unclear if other bidders who were previously exploring their own deals are still challenging Jurong Port for the stake....

....MUCH MORE

Sometimes frauds have very long tails.

And from The Star, December 15: 

Hin Leong’s Lim family and BP sued for US$313mil by Bank of China

SINGAPORE: Bank of China has sued BP in Singapore, and Hin Leong Trading founder Lim Oon Kuin and his two children, for a total of US$312.9mil (S$417.6mil) in the latest effort by a creditor to recover losses after one of the biggest trading scandals in decades.

The Chinese bank requested that BP repay US$125.7mil that it withdrew from the lender earlier this year based on sales of gas oil cargoes to Hin Leong, according to documents provided by the Supreme Court of Singapore. The deals were part of a “fictitious purchase scheme conspiracy” to maintain Hin Leong’s liquidity since no real transactions took place, the bank said....MORE

Recently:
Platts: "After Hin Leong: collapse of a Singaporean oil prodigy"

Unit of Singapore's Defunct Hin Leong Trading, Ocean Bunkering, Sees Licences Pulled, Ocean Tankers Wants To Give Up Ships

And many, many more.  

Platts: "After Hin Leong: collapse of a Singaporean oil prodigy"

From S&P Global Platts, September 24:

The Hin Leong scandal rocked the Singapore trading community earlier this year, topping many earlier bankruptcies in the commodities space in terms of financial losses. As the dust settles, Eric Yep unpicks the company’s path to self-destruction and assesses the fallout.

Hin Leong’s bankruptcy filing, on April 17, marked one of the world’s largest collapses of an oil trading firm. The story of the Singaporean company and its founder, Oon Kuin Lim, is inextricably linked with the history of the petroleum trade in Singapore and the Asia-Pacific region.

Oon Kuin Lim, more popularly known as OK Lim in industry circles, started his oil distribution business around 1965, the same year that Singapore separated from Malaysia to chart its own future, after several years of political differences.

In his first affidavit to a Singaporean court in April, OK Lim said he was a “one-man-one-truck” oil dealer, selling oil bought wholesale from the oil majors to taxi companies, bus companies, and fishing boat operators as the tiny Southeast Asian country built its economy.

OK Lim, born in China’s Fujian province, built his fleet of tank-trucks in Singapore over the years and incorporated Hin Leong in 1973 as an oil trading company, followed by Ocean Tankers in 1978 as a ship chartering and management company. He started the Universal Terminal tank farm in 2008.

The early years of Lim’s business were turbulent decades for the oil industry in Singapore, whose iconic downstream refining sector has seen everything from the rise of Asian crude grades such as China’s Shengli and Malaysia’s Tapis to the rise of US shale. The city state even helped fuel the Vietnam War at one point.

By virtue of being at the heart of Asia’s fuel supply chains, Singapore has also been home to the quintessential oil trader who arbitraged between prices, regions, fuel quality and geopolitics to profit from a barrel of oil. It was briefly the stomping ground of Glencore founder and legendary commodities trader Marc Rich, who, like OK Lim, had an immigrant rags-toriches story of his own in the US.

It is not so extraordinary, then, that OK Lim grew his fortunes in Singapore, eventually becoming one of the largest traders of petroleum products in the region and a regular on the Forbes list of Singapore’s richest people. Hin Leong’s bunkering arm was Singapore’s third largest bunker supplier in 2019, accounting for 10% of local bunker sales, and was a key supplier to countries like Indonesia and Myanmar in Southeast Asia.

Anatomy of a decline

When Hin Leong’s troubles became public it was the equivalent to the collapse of an institution, shaking Singapore’s commodity trading community to the core, not only those who had exposure to the company but also everyday traders who had dealt with OK Lim for decades.

In mid-August 2020, OK Lim was charged in Singapore’s court with abetment of forgery for the purpose of cheating, after investigations by the Commercial Affairs Department into Hin Leong’s business activities.....

(click to enlarge)

....MUCH MORE

Earlier: 

Unit of Singapore's Defunct Hin Leong Trading, Ocean Bunkering, Sees Licences Pulled, Ocean Tankers Wants To Give Up Ships

"How an epic gamble exposed the rot inside O. K. Lim's Hin Leong oil trading empire"

From the Straits Times, April 21:

The letters started to arrive in early April. One after the other, the titans of global finance, from JPMorgan Chase & Co to HSBC Holdings, demanded the immediate and urgent repayment of hundreds of millions of dollars in loans.

On the receiving end was Hin Leong, one of the most powerful and secretive names in oil trading. Founded in 1963 by a Chinese immigrant known to everyone in the industry as O.K. Lim, it was a giant in the world of shipping fuel from its base in Singapore.

Over the decades it had become one of the most fabled trading houses, the source of a billion-dollar fortune, and the subject of stories about legendary deals that made rivals sweat. But earlier this month, as oil prices collapsed in the fallout from the coronavirus, its foundations crumbled.

Banks had already been pulling credit lines, spooked by defaults at other trading houses. Smelling something wrong at Hin Leong, they started to ask for their money. When it failed to repay promptly, they called in their lawyers, and the game was up.

O.K. Lim, known formally as Lim Oon Kuin, has fallen on his sword, revealing he hid more than US$800 million (S$1.14 billion) in losses speculating in oil futures over the years. Worse still for the banks, Mr Lim said he had secretly sold some of the million of barrels of oil inventories the company had pledged as collateral for its loans. The gap between the company's assets and its liabilities stands at US$3.34 billion (S$4.76 billion).

The Singapore police force is now investigating the company while the Monetary Authority of Singapore, the nation's financial regulator and central bank, has been in contact with Hin Leong's bank creditors, according to people familiar with the matter.

The closely knit trading community in Singapore, where players bet hundreds of millions of dollars every day on the price of oil, is in shock at the downfall of one of its biggest names. Hin Leong, which means "prosperity" in Chinese, sought protection from its creditors in Singapore on April 17. Having spent decades keeping the inner workings of his company secret, Mr Lim came clean in a startling mea culpa....

....MUCH MORE

Earlier:
India’s ICICI Bank Seeks To Impound Two Tankers Operated By Hin Leong Trading Subsidiary
FT Backgrounder On Singapore's Hin Leong Trading (and some MAJOR accounting issues)

Skullduggery: Singapore's "Ocean Tankers Seeks to Reclaim $19 Mln from Lim Family"

From MarineLink:

The court-appointed manager of Singapore Ocean Tankers (Pte.) Ltd is seeking to reclaim about $19 million from the Lim family directors of the firm, who allegedly transferred the funds from the shipping company to their accounts in April, court documents show.

The interim judicial managers from EY said the Lim family "breached their fiduciary duties" by transferring the funds when Ocean Tankers was insolvent.

Ocean Tankers, owned by Oon Kuin Lim, founder of embattled oil firm Hin Leong Trading Pte Ltd, and his daughter Lim Huey Ching, was placed under interim judicial management on May 12.

The EY managers said in a statement of claim filed in the Singapore High Court that the family had failed to ensure that the firm's assets were not dissipated or exploited for their own benefit to the prejudice of the interests of the firm's creditors....

....MORE

And from the Straits Times August 14:

Hin Leong founder O.K. Lim charged with abetment of forgery for cheating, out on $3 million bail

Previously:
April 20 
India’s ICICI Bank Seeks To Impound Two Tankers Operated By Hin Leong Trading Subsidiary
April 20
FT Backgrounder On Singapore's Hin Leong Trading (and some MAJOR accounting issues)
April 19 
Shipping/Fuel: Singapore's Hin Leong Trading Is Bankrupt, Probable Disclosure and Bank Fraud Issues (HSBC exposure $600 Mil US)
Looking at my headline and thinking "duh", their selling off the collateral, of course there's a disclosure issue, it's the old rule of thumb, liars steal and stealers lie....
May 12
Singapore's Hin Leong May Have Knocked Société Générale Out Of the Commodity Financing Business

The crown jewel of the Lim fam's Hin Leong empire:

 

Singapore's Hin Leong Still Fueling Ships, Rescue Complicated By $4.25 Billion Debt

First up, Ship & Bunker:

Singapore's Ocean Bunkering Still Operating Amid Hin Leong Uncertainty: Sources

Ocean Bunkering, the top-three-ranked bunker supplier in Singapore, appears still to be operating this week despite reports of financial troubles for its parent company, oil trading firm Hin Leong.

Three bunker industry sources familiar with the Singapore market told Ship & Bunker that Ocean Bunkering's operations appeared to be continuing this week.

Last week Bloomberg reported two of Hin Leong's lenders were declining to issue it with new letters of credit, and on Wednesday the news agency followed that story with a report that the oil trading company may owe as much as $3 billion to its lenders.

Lights Remain On
One source said Ocean Bunkering had cut down its operations just to fulfilling previous commitments.
"They aren't offering for new enquiries, but are continuing to supply existing customers," the source said. 

"So it's not shut down with the lights out."
Two other sources said its operations appeared to be continuing as normal, without commenting on whether it was taking on new customers.

About half of the 14 bunker barges listed on Ocean Bunkering's website appear to be moving this week, according to vessel-tracking websites....MORE

And from Bloomberg via The Straits Times:

Singapore oil trader Hin Leong owes banks at least $4.25 billion

Banks have a combined exposure of at least US$3 billion (S$4.25 billion) to Singapore's Hin Leong Trading and are in talks with the privately held oil trader over how to shore up its finances amid concerns over its liquidity, according to people with knowledge of the matter.

The group of lenders including HSBC Holdings, DBS Group Holdings and OCBC Bank, held a virtual meeting with the trader and its advisers on Tuesday (April 14), according to the people, who asked not to be identified because they're not authorised to speak publicly. 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.

Singapore's close-knit oil trading community is gripped by speculation over the predicament of one of its biggest players and the potentially far-reaching impact its difficulties could have on the market and trading partners. Before crude's spectacular crash, it would have been almost unfathomable that a company of Hin Leong's status could be in such a position.....MORE

Singapore Oil Trader Hin Leong Trading Is On The Ropes With No Help From Bankers

Hin Leong is the second or third largest supplier of fuel for shipping in Singapore.
If they go down it's a pretty big deal.

From Reuters:
Singapore oil trader Hin Leong meets banks over finances - sources

SINGAPORE, April 15 (Reuters) - 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 advisors 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.
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....

....MORE 

Uh Oh: Singapore's Hin Leong Will Suspend Marine Fueling Operations As Soon As April 17

So no deal to save the company.
From Hellenic Shipping News, April 17: 

Ocean Bunkering to suspend marine fuel deliveries in Singapore – sources

Ocean Bunkering Services Pte Ltd (OBS), a subsidiary of Singapore trading company Hin Leong, has informed some customers that it plans to suspend marine fuel deliveries from as soon as Friday, three bunker traders who deal with OBS told Reuters.

Hin Leong Trading Pte Ltd is in talks with its lenders to extend credit after some banks failed to provide the firm with a letter of credit to buy at least one cargo of oil products.

OBS was the third-largest bunker fuel supplier by volume in Singapore in 2019. The move comes as demand for marine fuel has slumped due to a slowdown in global shipping activity amid the coronavirus outbreak....MORE

Wednesday 
Singapore's Hin Leong Still Fueling Ships, Rescue Complicated By $4.25 Billion Debt
Tuesday 
Singapore Oil Trader Hin Leong Trading Is On The Ropes With No Help From Bankers

Shipping/Fuel: Singapore's Hin Leong Trading Is Bankrupt, Probable Disclosure and Bank Fraud Issues (HSBC exposure $600 Mil US)

Looking at my headline and thinking "duh", their selling off the collateral, of course there's a disclosure issue, it's the old rule of thumb, liars steal and stealers lie.

From The Straits Times:

SINGAPORE  (REUTERS, BLOOMBERG) - The legendary founder of top Singapore oil trader Hin Leong Trading (HLT) directed the firm not to disclose hundreds of millions of dollars in losses over several years, he said in a court filing reviewed by Reuters.

The affidavit signed by Lim Oon Kuin, a Chinese immigrant in his 70s widely known as O. K. Lim, is part of a Friday (April 17) filing to the Singapore High Court by HLT and its shipping arm Ocean Tankers (Pte) Ltd, seeking a six-month moratorium on debts of US$3.85 billion (S$5.47 billion) to 23 banks.

The filing cites a collapse in oil prices and the coronavirus pandemic, which has hammered oil demand and pushed up costs for HLT, one of Asia’s largest oil traders.

Despite reporting net profit of US$78.2 million for the business year ended in October, “HLT has not been making profits in the last few years,” Mr Lim said in the filing, which has not been made public.

The company “suffered about US$800 million (S$1.14 billion) in futures losses over the years but these were not reflected in the financial statements,” he said. “In this regard, I had given instructions to the finance department to prepare the accounts without showing the losses and told them that I would be responsible if anything went wrong.”

Reuters was the first to disclose the existence of Mr Lim’s affidavit spelling out the losses and specific including his acknowledgement of personal responsibility for not reporting the losses. Bloomberg cited the US$800 million in losses in a report earlier on Sunday (April 19).

Mr Lim, reached by phone, declined comment to Reuters. The company is being advised by Rajah & Tann.

Mr Lim’s only son Evan Lim Chee Meng, a director at HLT and Ocean Tankers, said the company also sold some of the million of barrels of refined products it had used as collateral to secure loans from its banks, sources told Bloomberg, citing an April 17 email sent by Ocean Tankers notifying recipient parties of proposed moratorium proceedings....

....MUCH MORE 

Recently:
Apr. 14
Singapore Oil Trader Hin Leong Trading Is On The Ropes With No Help From Bankers
Apr. 15
Singapore's Hin Leong Still Fueling Ships, Rescue Complicated By $4.25 Billion Debt
Apr. 16
Uh Oh: Singapore's Hin Leong Will Suspend Marine Fueling Operations As Soon As April 17

Oil/Shipping: "Singapore court approves winding up of oil trader Hin Leong"

Well, except for the lawsuits and the recriminations and...

From Reuters, March 8:

Singapore’s High Court on Monday approved an application to wind up collapsed oil trading firm Hin Leong Trading Pte Ltd, marking the end of what was once one of Asia’s top oil traders, three sources familiar with the matter said.

Hin Leong, owned by Singaporean tycoon Lim Oon Kuin and his children, racked up some $4 billion in debt and entered court restructuring nearly a year ago.

The company had been seeking to restructure its debts after the oil price crash last year when Lim admitted in a court document to directing the firm not to disclose hundreds of millions of dollars in losses over several years.

Court-appointed judicial managers Goh Thien Phong and Chan Kheng Tek from accounting firm PwC had submitted an application to wind up Hin Leong on Feb. 5 and have been appointed as joint liquidators of the company, the sources said, speaking on condition of anonymity as they were not authorised to speak with media....

....MUCH MORE

If interested, March 2nd's "Singapore: "One-third of Hin Leong founder's ships sold to repay debt, say sources" (so far)" has quite a few of our links

"Singapore’s Oil Party Spoiled by Falling Prices and China Gloom"

I thought the party was over when the Hin Leong scandal came to light.

From Bloomberg via Yahoo Finance, September 6:

The oil party isn’t over yet — but for top merchants and executives gathering for talks and rooftop cocktails in Singapore this week, the exuberance that came with the outsized profits of recent years is quickly fading.

China’s economic slowdown, structural shifts in the global energy mix and the prospect of additional crude supply are all weighing on refiners and producers. Processing margins have tumbled. Traders will be no less glum, as the turbulence of the pandemic and of the months that followed Russia’s invasion of Ukraine — once-in-a-generation events — have been replaced by low volatility.

The thousands of oil executives, hedge funds and investors gathering for the Asia Pacific Petroleum Conference (APPEC) will be facing up to the grim reality that is already forcing Wall Street analysts to revise down price and demand forecasts. In recent weeks, global oil prices have erased all gains for this year. OPEC and allied nations have found themselves compelled to postpone a supply hike that could have tipped the market into surplus.

Sentiment is unquestionably bearish, said Warren Patterson, head of commodities strategy for ING Groep NV in Singapore, absent a return to the geopolitical uncertainty and trading frenzy of the years when Donald Trump was in the White House. “It would take something like Trump coming back in to shake things up again to add that kind of excitement and turbulence back into the market.”

Of all the gloomy topics at Asia’s biggest oil gathering of the year, the toughest to avoid will be China — and the question of whether cooling consumption is masking a more permanent decline in fossil fuel use as clean energy takes hold.

Beijing’s economic troubles run deep, and indicators have repeatedly sounded warnings on demand in the world’s largest crude importer, until recently a key source of growth for global crude. In August, factory activity contracted for a fourth straight month, while loan data has been uninspiring and the job market dour. Economists are now forecasting China will fall short of delivering its growth target of around 5% this year.

Traders who anticipated a stimulus-led recovery have repeatedly been forced to revise their forecasts, initially pushing the revival back to early this year and now into 2025....

....MUCH MORE

Ah, not Singapore's oil party but the oil party in Singapore. 

Still though, the Hin Leong crash was pretty loud. Here's part of the Universal Oil Terminal tank farm, part of which itself was part of O.K. Lim's empire (there were a lot of parts):

About which we noted:

The corporate brochure says 2.33 million cubic meter capacity which, our handy calculator tells us, is 14.65 million barrels. Plus room for some big boats.
By comparison Cushing Oklahoma's capacity is only 5 times that (assuming effective capacity is 85% of 'shell' capacity).
And no big boats.

—"China’s Sinopec in talks to buy stake in Hin Leong’s Singapore terminal: Sources"
Talk about a strategic asset, strategically locate: SINGAPORE, DO NOT ALLOW THIS!!

Shipping/Fuel: "Banks tighten credit on Asia oil traders as Hin Leong losses add to woes - sources"

This is brutal.
The traders live on financing and in markets that aren't making 5-sigma moves* the banks are comfortable with what is usually pretty liquid collateral.
And assuming the trader isn't all fraudy.
From Reuters:

Banks and trading companies are scaling down activities in Asia following the oil price collapse and financial problems at three companies including major Singapore trader Hin Leong, according to nine sources familiar with the matter.

The problems are threatening commerce in Singapore, Asia’s commodities trade hub, the banking and trading sources said. Billions of dollars of physical and derivative commodities change hands in the city-state in a supply chain that links financial institutions with traders and logistics companies that deliver fuel to the Asia-Pacific region and beyond.

The revelation of hundreds of millions of dollars of losses at HLT, one of Asia’s largest oil traders, came months after Agritrade International Pte Ltd entered into judicial management to restructure a $1.5 billion of debt, and Hontop Energy (Singapore) Pte Ltd went into receivership.

Scorched by losses at these companies and the crash in global oil prices since the start of the year, several banks are tightening credit and have also stepped up scrutiny on existing loans to oil trading companies, the sources said.

All existing and new credit lines to commodities traders in Asia are being put under stringent review by banks’ senior management following HLT’s losses and the crash in oil prices, two senior bankers told Reuters. They represent leading global trade finance banks that are two of Hin Leong’s top-10 creditors.

One of the bankers, from a European lender, said there was concern there could be further defaults in the region as oil prices plunge.  ...MUCH MORE

*As we learned when Goldman claimed we were seeing 25-sigma moves during the 2007 quantquake, even four and five sigma are pretty rare:
Here Is The Paper "How Unlucky Is 25 Sigma?" (25 Standard Deviation Moves Basically Don't Happen)

The 5-sigma event:

• a 5-sigma event is to be expected every 3,483,046 days or about 1 day every
13,932 years(!!)

Singapore: An Infrastructure Asset The Chinese Won't Be Getting, Jurong Port to take over O.K. Lim family's stakes in Universal Terminal

The introduction to April 2020's "China’s Sinopec in talks to buy stake in Hin Leong’s Singapore terminal: Sources":

Talk about a strategic asset, strategically located: SINGAPORE, DO NOT ALLOW THIS!!

I don't do the "Set caps on lock: Fire" thing (with two exclamation points) all that often but this is serious oil and shipping infrastructure, 20% of the tank farm capacity of  Cushing Oklahoma but with space for some very large oil tankers to berth.

Via AsiaOne, February 9:

Government-owned Jurong Port is set to take over the shares in a major oil storage terminal held by the Lim family behind collapsed oil trader Hin Leong, three sources with knowledge of the matter told Reuters.

The deal marks the sale of the crown jewel among oil and shipping assets owned by oil tycoon Lim Oon Kuin, better know as O.K. Lim, his son Evan Lim Chee Meng and daughter Lim Huey Ching.

It comes nearly a year after Hin Leong, once Asia's largest oil trader, racked up some US$4 billion (S$5.3 billion) in debt and entered court restructuring, followed by Ocean Tankers and Xihe Group also owned by the Lim family....

....MUCH MORE

 Know what I'm sayin' bruh?