Singapore oil trader Hontop's debts with DBS and SocGen close to being settled, say sources

SINGAPORE (BLOOMBERG) - China Wanda Group, the parent company of Singapore-based Hontop Energy, is close to settling the troubled oil trader's disputes with two of its major lenders, according to people familiar with the negotiations.

Shandong-based conglomerate China Wanda is in advanced talks with DBS Bank and Societe Generale, and has agreed to pay the outstanding debts on behalf of Hontop Energy (Singapore) via its other subsidiaries, said the people, who asked not to be identified as the talks are private.

Banks have been struggling to collect debts from failed commodities traders after oil's collapse exposed financial shortfalls and sparked accusations of fraud and dishonest dealings.

If successful, the Hontop deal could mark the first significant settlement amid a wave of disputes this year between trading houses and their lenders.

Hontop, which went into receivership in February, was placed under judicial management earlier this month by a Singapore court. Its outstanding debts totaled US$469 million (S$644.2 million) to seven lenders as of February, of which US$33.2 million was to DBS and US$63.3 million to SocGen, a general manager at Hontop said in an affidavit.

SocGen said by email on Thursday (Sept 24) that it's "not in a position to comment", while DBS declined to comment. Emailed inquiries to Wanda Group and Hontop's judicial manager, RSM Corporate Advisory, went unanswered.

The Singaporean units of lenders CIMB Bank and Natixis have also accused Hontop of fabricating documents and suspicious transactions. The allegations span four separate oil deals involving the three same companies: Hontop, Sugih Energy International, and oil major BP.

Hontop, which bought crude oil on behalf of an affiliated Chinese private refiner, Shandong Tianhong Chemical, said in March that its financial difficulties were caused by a collapse in demand because of the coronavirus.

That was before the virus spread globally, sparking oil's crash that saw prices in April momentarily plunge into negative territory.

 
 
 

The turmoil exposed the risks of financing the opaque business of moving raw materials around the world, and rocked the close-knit oil trading community in Singapore, one of the world's most important commodity hubs.

The turbulence has pushed banks to rethink commodity financing. SocGen decided to close its trade commodity finance unit in Singapore after the collapse of Hin Leong Trading, which owed more than US$3 billion to over 20 Singapore and international banks. ABN Amro Bank announced it would quit commodity trade finance, while BNP Paribas is shutting its Swiss commodity trade finance business.