SINGAPORE (Reuters) - Singapore oil trader Hin Leong Trading (Pte) Ltd, which has begun talks with lenders to extend its credit facilities, owes $3.85 billion to 23 banks, two industry sources said on Thursday.
The coronavirus pandemic has led to an unprecedented slump in fuel demand and hammered oil prices, making it difficult for trading firms to make a profit. Hin Leong is one of the largest fuel traders in Asia and an operator of a major tanker fleet.
Some of the banks held a call with Hin Leong and its advisers on Tuesday to discuss ways to provide short-term trade finance after some banks failed to provide the firm with a letter of credit to buy oil products.
“Hin Leong has asked for an extension (to repay creditors),” one of the sources with direct knowledge of the matter said.
Hin Leong did not respond to Reuters’ email and phone calls seeking comment.
The firm’s biggest lenders include HSBC Holdings, DBS, Overseas-Chinese Banking Corp, Bank of China, Societe Generale and Standard Chartered, said the second source, who was briefed on the discussions.
Societe Generale on Tuesday lodged a “general charge of receivables and contract rights” on Hin Leong with Singapore’s Accounting and Corporate Regulatory Authority (ACRA).
A charge is a form of security interest usually taken by a lender or creditor to secure repayment of a loan, according to ACRA’s website.
A spokeswoman for Societe Generale confirmed that it was a lender to Hin Leong but declined to comment further.
Separately, Hin Leong owed Bank of China about $200 million, a third source with knowledge of the matter said.
All sources spoke on condition of anonymity given the sensitivity of the matter.
HSBC, DBS, OCBC, Standard Chartered and ABN Amro declined to comment, while Bank of China did not immediately respond to requests for comment.
Hin Leong’s fuel trading has been affected by its financial issues, other industry sources said.
The company cancelled some oil products contracts for April cargoes because it had been unable to get banks to issue letters of credit, three sources with knowledge of the matter said.
At least two of the deals had been struck during the Market on Close (MoC) process by pricing agency S&P Global Platts, the sources said.
Hin Leong was an active participant during the MoC processes for oil products in Asia up until last week, trade data showed.
Under Platts’ methodology, a stressed party may request to withdraw from a trade, but its counterparty is under no obligation to accept such a request, Platts said, adding that the agency expects to be informed should this occur.
Platts, which assesses daily oil prices based on the MoC deals, said all their price assessments are completed based on the information available at the time of assessment.
They typically do not correct assessments based on fresh information provided after the fact, the agency added.
Platts declined to comment on whether Hin Leong has been put on review, which excludes a company from trading during the MoC processes for reasons ranging from credit issues to trade disputes to shipment technicalities.
Hin Leong’s bunker fuel subsidiary Ocean Bunkering Services Pte Ltd (OBS) has also informed some customers that it plans to suspend marine fuel deliveries from as soon as Friday, bunker traders said.
OBS was the third-largest bunker fuel supplier by volume in Singapore in 2019. The move comes as demand for marine fuel has slumped due to a slowdown in global shipping activity amid the coronavirus outbreak.
OBS owns a dedicated fleet of 14 Maritime and Port Authority of Singapore licensed bunker barges, according to the company’s website. It supplied about 3 million to 4 million tonnes of bunkers in 2019, according to estimates by industry sources.
Reporting by Roslan Khasawneh, Jessica Jaganathan, Chen Aizhu and Anshuman Daga; additional reporting by Koustav Samanta and Seng Li Peng; writing by Florence Tan; editing by Richard Pullin and Himani Sarkar
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