Oil dealer scandal in Singapore hits European banks

Bangkok Lim Oon Kuin worked on his raw material empire for more than half a century, which made him one of the most important oil traders in Singapore. Given the crash in the oil markets, a few weeks were enough to bring his company down. What remains are investigations by Singapore’s law enforcement officers and a mountain of debt of almost four billion dollars with several international banks – including the one German bank.

Hin Leong is the name of Lim’s company that became the first major victim of the oil crisis in Asia. Translated, the company name means “prosperity”. But there seems to be little left of the billion dollars Lim used to juggle the oil market and recently bet against a drop in prices.

Hin Leong filed for bankruptcy protection at the end of last week after the banks asked for the loans to be repaid. Now the auditing and consulting firm PwC should take control of the group during the debt restructuring talks, as the local newspaper “Straits Times” reported on Thursday, citing insiders.

The credit institutions threaten to remain on a large part of their claims. The remaining oil traders in the Southeast Asian financial metropolis are also facing a severe crisis: In response to the turbulence at Hin Leong, the banks are cutting their credit lines. The industry is now afraid of massive liquidity shortages. “Banks cancel their positions wherever possible,” commented industry consultant Jean-Francois Lambert. Singapore’s central bank was forced to warn the financial industry of a complete lending to the oil sector.

Hidden losses

The loss of confidence is also responsible for the impending credit crunch: Lim Oon Kuin, known in Singapore as O.K. Lim, admitted in an affidavit that he had hidden losses of $ 800 million. “I told the finance department not to let the losses show up in the books,” Lim wrote in the court document, according to the Bloomberg news agency.

The balance sheet for 2019 thus showed a profit of $ 78 million. “In truth, the company hasn’t made a profit in the past few years,” said Lim, whose assets the US magazine “Forbes” estimated in early April at $ 1.3 billion. The 76-year-old founder also admitted to having secretly sold millions of barrels of oil, which he guaranteed to the banks as collateral.

With the admission, Lim may be trying to avert harm from relatives who are also involved in the family business. His son, Evan Lim, who runs the Ocean Tankers spin-off with a fleet of around 100 oil tankers, said they hadn’t known about the events. As announced on Monday, Singapore’s police opened an investigation into Hin Leong.

The company’s approximately $ 4 billion in debt was only offset by assets of $ 700 million recently, the company reportedly told creditors. The losses at the 23 banks that loaned Hin Leong money could total $ 3.3 billion.

HSBC most affected

The UK Bank HSBC, which owes the company $ 600 million, is hardest hit. ABN Amro and the Rabobank from the Netherlands and the French Société Générale and the British Standard Chartered Bank has loaned Hin Leong between $ 200 million and $ 300 million each. Three local banks from Singapore collectively have claims of nearly $ 700 million.

Deutsche Bank and DZ Bank were also reportedly involved in the business with Hin Leong – with relatively low amounts. According to Reuters, Deutsche Bank is about $ 70 million and DZ Bank is about $ 40 million. Both banks did not want to comment on this on request.

Hin Leong was one of the largest suppliers of marine fuel in Singapore and played an important role in Southeast Asian gasoline trading. The group also owns a stake in a huge fuel depot. Sales talks with the Chinese company are now reportedly under way Sinopec.

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