Hin Leong Trading files for bankruptcy protection

Hin Leong Trading, the oil trader founded by one of Singapore’s richest men, has filed for bankruptcy protection as it seeks to restructure debts of almost $4bn.

The privately owned company told its lenders on Friday it was planning to make an application under section 211(B) of the Singapore Companies Act, according to people with knowledge of the situation. 

If granted by the High Court in Singapore it would give Hin Leong a 30-day moratorium period to hammer out a restructuring agreement with almost two dozen banks. 

In a letter to its lenders, the company said the filing was necessary for its survival, adding there was a “real threat of legal or insolvency proceedings being filed, or enforcement steps being taken, at any time”.

“HLT urgently and critically needs to use all its resources and management capacity to stabilise its management, business and operations as far as possible and to work with its creditors and advisers on the proposed debt restructuring,” the letter seen by the Financial Times said.

Hin Leong said it was also prepared to explore the option of judicial management if any of its lenders opposed the bankruptcy protection filing. This would see an independent manager appointed by a court to run the company.

“We invite the Bank Lenders to express their views accordingly,” the letter concluded.

Hin Leong declined to comment.

The plight of Hin Leong, founded in 1963 by self-made Chinese tycoon Lim Oon Kuin, has sent shockwaves through the commodity trading industry. 

The company is one of the largest suppliers of bunker, or ship fuel, in Asia and an active participant in the market-on-close system, which is used by traders to set oil prices in the region. 

Hin Leong, which has debts of $3.85bn, started talks with its lenders this week about a standstill agreement but they were not able to reach an accord. As a result the company decided to seek protection from its creditors.

HSBC is the bank with the biggest exposure to Hin Leong at $600m, followed by ABN Amro at $300m. Three Singaporean banks — DBS Group, OCBC Bank and United Overseas Bank — have exposure of $680m.

The Monetary Authority of Singapore, the City state’s de facto central bank, has been in touch with the banks on their exposures, people familiar with the situation said.

It is not clear what caused Hin Leong’s financing issues but they follow a spectacular collapse in oil prices, the slump in fuel demand caused by coronavirus and banks reducing their exposure to all but the biggest commodity traders.

This follows a series of scandals over the past year, most recently the collapse of Singapore-based Agritrade, which left 20 banks facing losses running into the hundreds of millions of dollars.

Traders were first alerted to problems at Hin Leong earlier this month when the company cancelled a number of contracts because it had not been able to get banks to issue letters of credit, a short-term financing tool for trading houses that act as a guarantee of payment to a seller. 

Hin Leong, which means “prosperity” in Chinese, was founded in 1963 and has grown into one of the biggest suppliers of marine fuel in Asia. Its turnover was $14bn in 2012, according to the company.  

OK Lim, as the company’s founder is better known in Singapore, started the business with a single truck supplying diesel to local fishermen. His net worth was recently put at $1.5bn by Forbes. He was born in Fujian province, China. 

Mr Lim’s business empire also includes Ocean Tankers, which says it has more than 100 ships and is run by his son Evan Lim, and Universal Terminal, an oil storage joint venture with PetroChina. 

Ocean Tankers, which counts Hin Leong as a client, has also filed for bankruptcy protection, according to people with knowledge of the situation. The company declined to comment.

Hin Leong is being advised by accountant PwC and law firm Rajah & Tann.