In a major development, the Singapore oil trader Hin Leong Trading has announced that they are appointing advisers to help in talks with banks as some of them freeze credit lines to the firm, reports the Strait Times.
What is it?
The firm appointed advisers last week to help negotiate with banks for more time to resolve its finances, said the people, who asked not to be identified because the matter is private.
There was no response to calls or e-mails to the firm seeking comment.
Bloomberg reported last Thursday that at least two lenders will not issue new letters of credit to Hin Leong amid concerns over its ability to repay debt.
Effect of Oil Price Crash?
The privately held company founded by legendary self-made Chinese tycoon Lim Oon Kuin could be the latest casualty of the crash in oil prices and a heightened caution among lenders to finance commodity trades.
Affects on Singapore Oil Market
Speculation over Hin Leong’s predicament is ricocheting around the tight-knit oil trading community in Singapore, one of the world’s most important oil markets and the biggest ship fuelling hub.
Before crude’s spectacular crash, it would have been almost unthinkable that such a major player in the market could be in such a position.
Hin Leong’s situation arises amid a torrid period for the Asian commodity trading industry, including multimillion-dollar losses by some high-profile Chinese and Japanese traders, and the collapse of Noble Group, one of the biggest names in the industry.
Why the Company’s Situation Is Important?
Hin Leong was established in 1963, and has grown into one of Asia’s largest suppliers of ship fuel, or bunkers. Mr O.K. 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, with 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.
- Hin Leong’s financial accounts could not be found on the website of Singapore’s accounting regulator.
- A brochure on its website, dated February 2014, said it had trading revenues of US$14 billion.
- In a rare interview in 2018, Mr Lim’s son said Ocean Bunkering Services aimed to raise its monthly bunker fuel sales to as much as one million tons from 650,000 tons in January that year.
How Important Are Letters of Credit?
Singapore’s monthly bunkering sales averaged around four million tons in the past five years.
Letters of credit are a critical financial lifeline for commodity traders, used as a way of financing short-term trade.
A bank issues the letter of credit on behalf of the buyer as a guarantee of payment to the seller. Once the goods have changed hands, the buyer repays the lender.
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Source: Strait Times