Singapore oil trader Hin Leong Trading (Pte.) Ltd. has appointed advisers to help in talks with banks as some of them freeze credit lines to the firm, according to people with knowledge of the matter.
Bloomberg reported on Thursday that at least two lenders won’t issue new letters of credit to Hin Leong amid concerns over its ability to repay debt. The firm appointed advisers this week to help negotiate with banks for more time to resolve its finances, said the people, who asked not to be identified because the matter is private.
Nobody responded to calls or emails to the company seeking comment.
The privately-held company founded by legendary self-made Chinese tycoon Lim Oon Kuin could be the latest casualty of the crash in oil prices and a heightened caution among lenders to finance commodity trades.
Speculation over Hin Leong’s predicament is ricocheting around the tight-knit oil trading community in Singapore, one of the world’s most important oil markets and the biggest ship fuelling hub. Before crude’s spectacular crash, it would have been almost unthinkable that such a major player in the market could be in such a position.
Hin Leong’s situation arises amid a torrid period for the Asian commodity trading industry, including multi-million dollar losses by some high profile Chinese and Japanese traders, and the collapse of Noble Group, one of the biggest names in the industry.
Hin Leong was established in 1963 and has grown into one of Asia’s largest suppliers of ship fuel, or bunkers. OK Lim, as the founder is known, built the company from a one-man-one-truck oil dealer to a regional powerhouse with assets including 130 vessels, with businesses across oil trading, terminal and storage, bunker supply and lubricants manufacturing, according to its website.
The company’s bunkering arm, Ocean Bunkering Services (Pte.) Ltd., was ranked the third-largest shipping fuel supplier in Singapore last year, according to the city-state’s Maritime and Port Authority.
Hin Leong’s financial accounts couldn’t be found on the website of Singapore’s accounting regulator. A brochure on its website, dated February 2014, said it had trading revenues of $14 billion.
In a rare interview in 2018, OK Lim’s son said Ocean Bunkering Services aimed to raise its monthly bunker fuel sales to as much as 1 million tons from 650,000 tons in January that year. Singapore’s monthly bunkering sales averaged around 4 million tons in the past five years.
Letters of credit are a critical financial lifeline for commodity traders, used as way of financing short-term trade. A bank issues the so-called L/C on behalf of the buyer as a guarantee of payment to the seller. Once the goods have exchanged hands, the buyer repays the lender.