Singapore-based Hin Leong Trading (HLT), one of Asia’s largest oil shippers, has sought protection against liquidation from 23 of the world’s biggest banks amid revelations of its founder’s cover-up. The company has filed for protection against liquidation, blaming the recent crash in oil prices.

HLT filed for a debt moratorium last week, which gives it 30 days of protection from the 23 banks to which it owes US$3.85 billion. But its billionaire founder, O.K. Lim, has also now admitted he cumulatively covered up US$800 million in oil futures losses over the years.

O.K. Lim said in an affidavit as part of the HLT protection filing that he had hidden US$800 million in oil trading losses. 

Lim’s son Evan runs its shipping business, Ocean Tankers, which boasts a fleet of 130 oil tankers. That business has separately filed for six months of debt protection. Evan Lim said his father told him to sign off on HLT’s financial statements, but Evan Lim says his father was responsible for all the finances, and Evan wasn’t aware of what was going on.

Lim admitted: “HLT has not been making profits in the last few years.” 

This admission comes despite the fact that HLT reported a net profit of US$78.2 million for the business year that ended last October.

According to Reuters, Lim said in the affidavit that the company “suffered about US$800 million in futures losses over the years, but these were not reflected in the financial statements. In this regard, I had given instructions to the finance department to prepare the accounts without showing the losses and told them I would be responsible if anything went wrong.”

Lim resigned immediately as a Director of the company he founded, and from Ocean Tankers. 

According to oil and commodities tracker S&P Global Platts, Lim admitted in the sealed court filing that HLT in the past had posted derivatives losses that caused margin calls, which he asked the finance department to reflect as “accounts receivables” on the books.

Lim said: “Further, over the years, HLT had, on my instructions, sold a substantial part of the inventory and used the proceeds as the general funds of HLT, even though the inventory was the subject of inventory financing provided by bank lenders.”

He added: “I wish to explain that each of such transactions was documented based on a transaction where cargo was actually shipped, so as to raise additional financing which HLT knew it had to repay. This was not done with the intention to defraud or deceive any party.”

ICICI has reportedly sought to impound two tankers, the Wu Yi San and Chang Bai San, since its oil cargoes were financed by the Indian bank.

Société Générale (SCGLF) has confirmed it is among the other lenders, reportedly owed US$240 million. SocGen has lodged a charge against HLT’s receivables and assets.

Singapore police said it has launched an investigation, although the force declined to discuss its focus. It has a unit, the Commercial Affairs Department, that investigates white-collar crime.

HLT’s automatic 30-day debt moratorium to avoid liquidation reportedly can be extended by six months to one year, subject to court approval.

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24th April 2020