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

Hin Leong's Pu Tuo San VLCC supertanker in the waters off Jurong Island, on July 11, 2019. PHOTO: REUTERS

SINGAPORE (BLOOMBERG) - 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.

Bloomberg reported last week that some banks wouldn't issue new letters of credit to the trader because of concern over its ability to repay the short-term debt. Nobody responded to calls or e-mails to the company seeking comment. Spokesmen for HSBC, OCBC and DBS declined to comment.

Founded by legendary self-made Chinese tycoon Lim Oon Kuin, Hin Leong could be the latest casualty of the collapse in oil prices and a heightened caution among lenders to finance commodity trades.

The company was established in 1963 and has grown into one of Asia's largest suppliers of ship fuel, or bunkers. OK Lim, as the founder is known, built the company from a one-man-one-truck oil dealer to a regional powerhouse with assets including 130 vessels and businesses across oil trading, terminal and storage, bunker supply and lubricants manufacturing, according to its website.

The company's bunkering arm, Ocean Bunkering Services, was ranked the third-largest shipping fuel supplier in Singapore last year, according to the city-state's Maritime and Port Authority. Singapore is the world's biggest shipping fuel bunkering hub.

Letters of credit are a critical financial lifeline for commodity traders, used as way of financing short-term trade. A bank issues the so-called L/C on behalf of the buyer as a guarantee of payment to the seller. Once the goods have changed hands, the buyer repays the lender.

Join ST's Telegram channel and get the latest breaking news delivered to you.