These have not been sunny days in Singapore.
The Lion City has seen cases of Covid-19 surge to 10,141 as of Wednesday after it did an excellent job of containing the early outbreak of the disease. It had only 1,000 cases at the start of April. Now the coronavirus is running rampant through the dormitories where its legion of cheap, mainly Indian migrant laborers must live.
Also worrying the business community is the collapse of the city's oil trading giant Hin Leong Trading, or HLT. The company has filed for protection against liquidation, blaming the recent crash in oil prices.
Oh, and HLT's billionaire founder, O.K. Lim, admits he covered up the small matter of US$800 million in oil futures losses over the years.
HLT on Friday filed for a debt moratorium, which gives it 30 days of protection from the 23 banks to which it owes US$3.85 billion. Its creditors list is a Who's Who of Asian and European lending.
With a fortune pegged at US$1.65 billion, O.K. Lim is one of Singapore's richest men... or at least he was. "As of late April 2020, Lim is no longer a billionaire," Forbes says on its website, following word of HLT's losses. He had been good for No. 18 on the city's Rich List.
HLT is one of Singapore's largest oil trading companies. 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.
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.
Cover-up revealed
"HLT has not been making profits in the last few years," Lim admitted, even though HLT reported a net profit of US$78.2 million for the business year that ended last October.
The company "suffered about US$800 million in futures losses over the years, but these were not reflected in the financial statements," Lim said in the affidavit, according to Reuters. "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. Full name Lim Oon Kuin, he is one of those classic Asian rags-to-riches stories.
Born in poverty in mainland China, he moved to Singapore at age 12. He founded HLT in 1963, at the age of 20, hand-delivering diesel fuel to fishermen on his single rickety truck. He dropped off buckets of oil on his bicycle when the truck was in the shop.
Lim built HLT into an oil transportation giant. HLT also co-owns the Universal Terminal, a huge oil storage terminus off the south coast of Singapore, with partner PetroChina.
Problems seen and unseen
HLT seems to have run aground amid this month's collapse in oil prices, which for U.S. crude have turned negative. HLT had suffered recent trading losses and its lenders had withdrawn lines of credit. But it now admits much deeper problems.
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.
"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," Lim said.
"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," Lim said.
Evan Lim, the founder's son, also lodged an affidavit. The son 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.
Big banks owed big sums
Although HLT is family-held, its creditors are large and listed. The revelation that the Indian bank ICICI (IBN) is among them, owed US$100 million, was enough to wipe 8.1% off its shares in Tuesday trading in New York.
ICICI reportedly has 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.
Three of the creditors are owed more than SocGen, according to a company presentation to lenders and reported by Reuters: HSBC (HSBC) (US$600 million), ABN Amro AAVMY (US$300 million) and OCBC OVCHY (US$250 million).
Other lenders owed at least US$100 million are Standard Chartered HK:2888 (US$240 million), Rabobank AS:RABO (US$230 million), Bank of China BACHY (US$210 million), ANZ ANZBY (US$190 million), Natixis NTXFY (US$160 million), Crédit Agricole CRARY (US$100 million), CTBC Financial CTFHY (US$100 million) and ICICI (US$100 million).
Among the other creditors are Qatar National Bank (QNBC) (US$70 million), Deutsche Bank (DB) (US$70 million), Westpac (WBK) (US$60 million), ING Groep (ING) (US$50 million), JPMorgan Chase (JPM) (US$50 million) and DZ Bank (US$40 million). It's not clear how much DBS DBSDY is owed, or what the remaining four banks are.
Singapore police say they have launched an investigation, although the force declined to discuss its focus. It has a unit, the Commercial Affairs Department, that investigates white-collar crime.
The crash in oil prices and these admissions have ravaged HLT's books. Its inventory fell from US$1.3 billion last Oct. 31 to US$141 million on April 9, according to court filings. Also as of April 9, it had US$4.05 billion in liabilities and total assets of US$714 million, a deficit of US$3.3 billion.
HLT's automatic 30-day debt moratorium to avoid liquidation reportedly can be extended by six months to one year, subject to court approval.
