Singaporean oil trader Hin Leong has admitted to $800 million in undisclosed losses racked up in futures trading on the instruction of the company’s founder OK Lim. Hin Leong also sold millions of barrels of its inventories that it declared to banks as debt collateral. This leaves a massive shortfall between the oil stocks pledged to its lenders and the inventories it held
OK Lim’s son, Evan Lim said his father had ordered Hin Leong’s finance department to omit losses it suffered over some years, contrary to its financial reports. The commodity trader reported a total net profit of $78 million and liabilities and equity of $4.56 billion in the fiscal year ended October 31, 2019. However, it told its banks in April that assets were just $714 million, while total liabilities were $4.05 billion as of early this month, leaving a hole of about $3.34 billion.
Deloitte & Touche LLP audited Hin Leong’s latest accounts for the period and didn’t flag any problems. In the audited statement, Hin Leong said it had $1.28 billion worth of oil product stocks, but it told its creditors that it only had $141 million of them. The company had $461 million in cash as of October 2019, but ever since has plunged to $50 million by this month.
Hin Leong owes about $3.85 billion to about 20 lenders, including HSBC. Societe Generale SA and ABN Amro Bank NV have filed claims in Singapore related to Hin Leong cargoes and receivables. Hin Leong and affiliate Ocean Tankers, both owned by the Lim family, have filed for court protection from creditors on Friday.
Commenting on the collapse of Hin Leong, Transport Minister Khaw Boon Wan on Monday said that the impact on the Singapore bunker market would be manageable despite some immediate collateral impact through credit-tightening on other players.
