SINGAPORE: The financial woes of Hin Leong Trading have “no serious impact” on Singapore’s oil trading and bunkering sectors, and the country’s banking system remains “sound”, said three government agencies in a joint statement on late Tuesday (Apr 21).
A flurry of media reports over the past week has shone the spotlight on the home-grown oil trader, which sought court protection against its creditors last Friday and revealed in court filings that its billionaire founder had directed the firm to hide about US$800 million in losses over the years.
Earlier on Tuesday, the police confirmed that “investigations are ongoing” into the debt-laden firm, although it did not elaborate on the nature or scope of its investigations.
In a joint statement issued in response to media reports, Enterprise Singapore (ESG), the Maritime and Port Authority of Singapore (MPA) and the Monetary Authority of Singapore (MAS) said that they are “closely monitoring” developments related to the debt-stricken oil trader as well as the broader oil trading and bunkering sectors.
ESG said Singapore’s oil trading sector “remains resilient notwithstanding the challenges posed by the drop in global demand for energy” and is “sufficiently diversified” with more than 130 global, regional and local companies that trade energy products.
Singapore is an important regional storage, blending and distribution hub for refined oil products.
Hin Leong was founded in 1963, starting out as a one-man-one-truck supplier of diesel to small fishing vessels before growing into one of the region’s biggest names, with operations across oil trading, terminal and storage, bunker supply, lubricants manufacturing and inland transportation services.
According to its website, Hin Leong’s Ocean Tankers owns and operates more than 130 vessels, while its bunkering arm, Ocean Bunkering Services, is one of Singapore's largest marine fuel suppliers.
It also partly owns Universal Terminal, a commercial storage facility on Singapore's Jurong Island.
“While Hin Leong is related to UT Singapore Services Private Limited which owns Universal Terminals by common shareholdings, Universal Terminals is operated independently of Hin Leong,” said ESG in the joint statement on Tuesday.
“Besides Universal Terminals, there are other independent oil terminal operators in Singapore including Vopak, Oiltanking and Tankstore,” it added.
MPA cautioned of “some short-term minor disruptions” due to the lapse of contractual obligations by Ocean Bunkering Services and Hin Leong Marine International, but said there will be “no serious impact” on the local bunkering industry.
MPA added that the Singapore bunkering sector is well diversified with 43 other licensed bunker suppliers, including Minerva Bunker and TFG Marine which recently received their licences.
“ESG and MPA will continue to work with stakeholders to ensure that Singapore’s supply chain for oil products and bunkering operations continue to function without disruption,” the statement said.
Concerns about Hin Leong’s finances emerged early this month with a report that said some lenders had frozen credit lines to the firm.
At least two banks will not issue new letters of credit citing concerns about the firm’s ability to repay debt, according to a report by Bloomberg on Apr 9.
The troubles at Hin Leong are said to affect 23 banks, with HSBC reportedly having the biggest exposure at about US$600 million and followed by ABN Amro at US$300 million.
MAS said in the joint statement that it is in close contact with banks and “has reminded the banks not to de-risk indiscriminately from the bunkering and oil trading sectors”.
However, banks should “continue to apply judicious credit assessment on individual borrowers to manage their risks”, said the central bank.
“The banks are well capitalised and diversified in their exposures to these sectors,” it added in the statement.
“MAS is also closely monitoring liquidity and credit conditions in the market which, on the whole, continue to be supportive of households and businesses.”