SINGAPORE (Apr 21): The Monetary Authority of Singapore has told banks here not to “de-risk indiscriminately” from the bunkering and oil trading sectors.
Hin Leong Trading, a major oil trading and bunkering provider, is seeking protection from creditors.
It has some U$800 million in undeclared losses, and the police have commenced investigations.
As at April 9, the company carries a debt of more than US$4 billion versus assets of US$714 million.
The privately-held company owes more than two dozen banks some US$3.85 billion. HSBC is the most exposed with US$600 million, followed by ABN Amro with US$300 million.
The three local banks, DBS, OCBC and UOB, are owed US$290 million, US$250 million and US$140 million respectively.
“The banks are well capitalised and diversified in their exposures to these sectors,” state MAS, Maritime Port Authority and Enterprise Singapore in late night joint statement on April 21.
“MAS is also closely monitoring liquidity and credit conditions in the market which, on the whole, continue to be supportive of households and businesses,” they add.
Hin Leong’s woes come about following years of undeclared losses and its liquidity further strained when banks start to tighten credit lines after other players in the same industry defaulted.
The government bodies also note that Singapore’s oil trading sector remains “resilient”, even though the market of black gold is seeing unprecedented volatility with unheard of negative prices seen on April 20.
Demand has cratered amid the Covid-19 outbreak, as factories stop operating and aircraft stop flying.
There are more than 130 significant global, regional and local companies that trade energy products, which ensures a certain level of diversity despite Hin Leong’s market leading position.
According to MPA, while there’s short-term minor disruptions due to the lapse of contractual obligations by Ocean Bunkering Services, Hin Leong’s subsidiary, there will be “no serious” impact on Singapore’s bunkering industry.
There are 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 reads.
