Founder of oil trader admits not disclosing $1.1b in losses

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 seen by Reuters.

The affidavit signed by Mr Lim Oon Kuin, a Chinese immigrant in his 70s widely known as O.K. Lim, is part of a filing to the Singapore High Court by HLT and subsidiary Ocean Tankers, seeking a six-month moratorium on debts to 23 banks totalling US$3.85 billion (S$5.5 billion).

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 last 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."

Mr Lim declined comment to Reuters, as did his lawyer, Mr Patrick Ang, managing partner at Rajah & Tann Singapore.

Mr Lim's son, Mr Evan Lim Chee Meng, a director at HLT and Ocean Tankers, who also submitted a signed affidavit with the debt-moratorium request, did not respond to an e-mail requesting comment. HLT and Ocean Tankers could not be reached for comment over the weekend.

Of HLT's lenders, HSBC Holdings has the biggest exposure at US$600 million, followed by ABN Amro at US$300 million.

Three Singapore banks - DBS Group, OCBC Bank and United Overseas Bank (UOB) - have a combined exposure of at least US$600 million. DBS has the highest exposure at around US$290 million, OCBC is owed about US$220 million while UOB extended US$100 million, The Business Times reported earlier.

The Monetary Authority of Singapore has been in touch with the banks on their exposures, said the Financial Times.

The affidavit, which said Mr Lim Oon Kuin was resigning immediately as director of the family-held company he founded half a century ago with a single delivery truck, did not specify over how many years the losses were incurred or why he was blaming HLT's difficulties on problems that arose largely in the past few months.

Under Singapore law, the filing last Friday automatically protects HLT from legal action by creditors for 30 days while the court decides whether to grant the six-month debt-repayment extension.

Mr Lim said in the filing that HLT had held a video conference last Tuesday with creditors and advisers "to inform bank lenders of HLT's financial position", which it said included liabilities of US$4.05 billion against assets of US$714 million as of April 9.

A drop of two-thirds in the oil price in the first three months of this year, a tightening of bank credit lines, as well as margin calls at HLT caused a "severe depletion" of the company's cash reserves, he said.

HLT recorded payments to meet the margin calls as accounts receivable, sold "a substantial part of inventory" being financed by banks to raise cash and did not sufficiently hedge its exposure to a fall in oil prices, Mr Lim said.

PetroChina International (Singapore), the trading arm of Chinese state-owned energy giant PetroChina, has terminated petroleum sales contracts with HLT and demanded an immediate payment of US$23.87 million, he said.

PetroChina did not immediately respond to requests for comment.

HLT may file more affidavits with further information, including a list of the 20 largest unsecured and unrelated creditors, Mr Lim said.

HLT's sprawling empire also includes Ocean Bunkering Services, one of Singapore's top three marine fuel suppliers, and Universal Terminal, one of Asia's biggest oil storage terminals, located on Jurong Island, which it co-owns with PetroChina.

REUTERS