Hin Leong, Ocean Tankers apply for court protection

Market: Oil products
20/04/20

Singapore oil trading firm Hin Leong and its Ocean Tankers (OTC) arm have applied to the Singapore courts for protection against creditors.

Hin Leong and Ocean Tankers have applied to the Singapore courts to withhold any legal actions stated under section 211B of the Companies Act. A copy of Ocean Tankers' court filing seen by Argus confirms the company's court application. Hin Leong's court filing was confirmed by sources close to the company.

Hin Leong did not respond to requests for comment. The financial strength of the company, one of Singapore's biggest oil trading firms, has come under increasing scrutiny this month amid the collapse in market prices, threatening a knock-on impact on shipping, storage and trading in the city-state.

Singapore's High Court may grant a moratorium that will prevent creditors from taking steps to enforce their debt obligations. The filing shows that 23 Banks had a combined exposure of $3.85bn to Hin Leong as of 9 April. The company's credit lines have already been withdrawn and reduced by banks.

The collapse in oil prices coupled with the reduction in credit lines exacerbated Hin Leong's already weakened financial position, forcing it to sell oil product cargoes at a loss to maintain cash flow after creditors made margin calls, the Ocean Tankers filing said.

Hin Leong was already in talks with traders to cancel some of its gasoline loadings because of problems securing short-term credit lines, market participants said.

It also faced multiple demands from banks to not discharge some gasoil, jet fuel and gasoline cargoes without the banks' consent.

Hin Leong has bought over 5.3mn bl of gasoline in the window so far this year, accounting for over half of total purchases in the period, according to market estimates.

It also an active participant in other product markets such as marine fuel, fuel oil, gasoil and jet fuel. Its estimated purchases of 2mn bl of 0.5pc sulphur marine fuel cargoes make up about 40pc of total volumes so far this year. Hin Leong is both a buyer and seller of jet fuel and 10ppm gasoil, accounting for 75pc and 25pc of traded volumes for the products respectively.

Hin Leong, which was established in 1963 by Lim Oon Kuin, is one of Asia-Pacific's largest independent oil trading companies, with trading revenue of more than $14bn/yr. The company also has a bunkering arm, Ocean Bunkering Services (OBS), which has a major presence in the Singapore bunker market, and operates Universal Terminal, an oil storage facility with 2.33mn m³ (14.6mn bl) of capacity, in a joint venture with state-controlled PetroChina.

Ocean Tankers, which has a fleet of over 150 vessels, stressed last week that it operates as a separate entity to its parent company. The company said in its court filing that it would have been solvent but for the financial exposure it faces as a result of Hin Leong's financial difficulties. Both Ocean Tankers and Hin Leong are 100pc owned by the Lim family.

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