HSBC Bank, supported by four other lenders, yesterday succeeded in getting the High Court to place oil trader ZenRock Commodities Trading under interim judicial management.
In a full-day remote court hearing attended by lawyers for six banks and an unsecured trade creditor, ZenRock had contested HSBC's application for interim judicial managers from KPMG Services to be appointed, pending the making of a judicial management order.
The Straits Times understands that most of the banks - Credit Agricole, Bank of China, ING Bank and Banque de Commerce et de Placements - supported HSBC, while the fifth, Natixis, did not take any position.
ZenRock is expected to file an application to set aside the court's decision.
HSBC and other banks are stepping up efforts to avoid further losses after the failure of Hin Leong, the Singapore oil trader that owes 23 banks almost US$4 billion (S$5.7 billion).
HSBC reportedly has the most exposure to Hin Leong, at US$600 million, as part of its global oil trading portfolio of US$2 billion.
On Monday, HSBC filed an application in the High Court for ZenRock to be placed under judicial management, a form of debt restructuring that involves having an independent party manage the company's affairs.
In an affidavit supporting the application, HSBC's head of commodities and energy Kiu Hock Yean said the drastic fall in the value of oil globally has resulted in many banks requiring traders to provide cash to cover their outstanding liabilities.
HSBC has serious concerns about ZenRock's ability to repay its debts, and the bank's demands for payment in excess of US$50 million remain unmet, he said.
ZenRock currently owes HSBC about US$49 million, while its total debt to banks is understood to stand at around US$165 million, he said.
The affidavit also raised suspicions that ZenRock was involved in questionable transactions by using the same cargo to obtain financing from multiple lenders.
Following HSBC's move, ZenRock applied for a moratorium to freeze legal actions against the company.
ZenRock president Xie Chun said in an affidavit that the company believes it can trade its way out of its current financial difficulties if it were given sufficient time and opportunity to seek a consensual restructuring of its liabilities, or a scheme of arrangement.
Yesterday, it was represented by two sets of lawyers - one from Rajah & Tann to argue for the moratorium, and another from Tan Rajah & Cheah to oppose HSBC's application.
HSBC was represented by Shook Lin & Bok's Senior Counsel Sarjit Singh Gill and Mr Daniel Tan Shi Min.