Singapore-based Hin Leong Trading has filed for bankruptcy protection as it seeks to restructure debts of almost $4 billion.
Hin Leong was established in 1963 and its portfolio includes Universal Terminal, one of Asia’s biggest oil storage terminals, located on Jurong Island, which it co-owns with China’s state-owned oil giant PetroChina as well as Ocean Bunkering Services – one of Singapore’s top three marine fuel suppliers
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 said, according to the UK Financial Times.
Hin Leong said it was also prepared to explore the option of judicial management if any of its lenders opposed the bankruptcy 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 $3.85 billion, 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 $300 million. Three Singaporean banks — DBS Group, OCBC Bank and United Overseas Bank — have exposure of $680 million. 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.