Hin Leong's Ocean Tankers granted interim JM
Court documents show Ocean Tankers is exposed to potential claims estimated at US$2.07b involving bills of lading it had issued in relation to HLT's trades.
Following in the footsteps of its troubled sister company Hin Leong Trading (HLT), Ocean Tankers Pte Ltd - Singapore's largest tanker operator - was granted interim judicial management (IJM) by the High Court on Tuesday.
The Business Times understands the court has appointed Ernst & Young's Angela Ee and Purandar Rao as the interim judicial managers for the shipping giant.
Based on court documents, Ocean Tankers is exposed to potential claims estimated at a staggering US$2.07 billion involving bills of lading (BOL) that it had issued in relation to HLT's trades after the cargoes on board the vessels were sold when the oil trader hit troubled waters.
Sources said there were just over 35 "interested parties" - mostly creditors - present at Tuesday's virtual hearing that lasted about three hours and was heard before High Court Judge Kannan Ramesh.
This comes two weeks after the court granted an IJM order to HLT and appointed Goh Thien Phong and Chan Kheng Tek of PricewaterhouseCoopers Advisory Services as interim judicial managers.
Similarly, the interim judicial managers for Ocean Tankers have eight weeks to file a preliminary report which will include an assessment on whether Ocean Tankers can be restructured or rehabilitated.
Ocean Tankers, which charters and manages over 150 vessels including very large crude carriers (VLCCs) and is one of the world's largest oil-tanker operators, is helmed by chief executive Evan Lim Chee Meng - son of Hin Leong's founder, low-key tycoon Lim Oon Kuin, better known as OK Lim.
It counts oil majors Exxon Mobil, Shell and BP and giant traders such as Vitol, Lukoil, and Glencore as well as China's state-owned enterprises Unipec and Petrochina as customers.
Together with Ocean Bunkering Services - the city state's third-largest marine fuel supplier by volume last year - Hin Leong group is a behemoth downstream player in Singapore's key oil hub, providing everything from oil trading, terminalling and storage, bunker supply, lubricants, inland transportation services to diesel retail and marine logistics.
It is no wonder then that the cash woes of HLT, Singapore's largest oil trader, with debts of nearly US$4 billion have rocked the tighly-knit commodity trading circles here amid a pandemic-triggered oil slump. "No one else is bigger than him (OK Lim). For a lot of bunker suppliers and oil traders here, he is a big brother who is now in trouble. The amount of debt has shocked the sector," said a long-time maritime expert.
HLT's headache is also Ocean Tankers, not least because the businesses are deeply interconnected.
Court documents reveal that Ocean Tankers had a "substantial amount of business" with HLT. HLT, the group's flagship, regularly nominated Ocean Tankers' vessels to carry out contracts for a majority of its sale and purchase of oil.
However, these cargoes were discharged against instructions or letters of indemnity issued by HLT, hence exposing Ocean Tankers - the BOL issuer - to claims from BOL holders, be it banks which issued financing facilities based on the inventory or buyers and sellers of the cargo.
In his affidavit to support Ocean Tankers' JM application, Mr Evan Lim said Ocean Tankers will be unable to pay its debt if there were demands from BOL holders.
Most of Ocean Tankers' fleet of vessels is bareboat chartered from Xihe Holdings and its units, which are fully owned by the Lim family. Mr Evan Lim said the entities under Xihe Group are Ocean Tankers' major creditors with some US$314 million owing including US$208 million in company loans.
Both HLT and Ocean Tankers had earlier in April sought a six-month debt moratorium from the court but withdrew the applications and filed for JM instead after creditors pushed for a court-supervised restructuring when it came to light that HLT had hid from its financial statements losses of US$800 million it had incurred from futures trading.
Singapore's Commercial Affairs Department has also launched a probe into HLT.
Mr Evan Lim said in the company's application that the JM would give comfort to the market in dealing with Ocean Tankers as the management would be in the hands of court-appointed officers, and "thus avoid the perception of being linked to financial troubles of HLT".
However, he said that while the shipping firm's business will be better able to continue under the moratorium accorded by the JM regime, the business may not return to levels prior to the onset of the Covid-19 pandemic.
Also, he added that it will be difficult to "completely shake off" the market perception of Ocean Tankers' links to HLT's troubles. As the shipping firm may not be able to fully meet all operational costs and expenses, he added that Ocean Tankers was mulling the sale of some non-core vessels to raise cash.
Rajah & Tann is the legal adviser for both HLT and Ocean Tankers.
Meanwhile, BT understands that Mr OK Lim has hired Senior Counsel Chelva Rajah while his children - Mr Evan Lim and daughter Lim Huey Ching, who are HLT directors - have hired Senior Counsel Kenneth Tan to represent them in the negotiations with the creditors.
BT further understands that Ocean Tankers is also seeking for the JM application and protection from any charge or claims during the JM process to be extended to the company's property outside Singapore. This, according to a source, was a late addition in the company's JM application and the court made no order on the matter.
The turmoil from plunging oil prices as the virus outbreak batters energy demand is engulfing other players too. Reuters reported that Singapore-based ZenRock Commodities Trading which owes more than US$600 million to creditors has been placed under an IJM.
Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.