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HIN LEONG: Sembcorp Cogen Obtains Court Order to Secure Gasoil

This story was published in Troubled Company Reporter – Asia Pacific (TCR-AP). Subscribe or sign up for a free trial.

Vivienne Tay at The Business Times reports that Sembcorp Industries’ (SCI) wholly-owned power generation subsidiary Sembcorp Cogen on April 24 obtained an order from the Singapore High Court to restrain Universal Terminal from moving, removing or disposing of any gasoil reserves designated for the subsidiary.

Under the court order, the oil storage terminal – co-owned by debt-hit giant oil trader Hin Leong Trading (HLT) and located on Singapore’s Jurong Island – is also required to ensure those gasoil reserves are stored separately from any other gasoil, BT relates.

There is a possibility that the gasoil reserves designated for Sembcorp Cogen may be subject to competing claims by one or more third parties, SCI said on April 27, according to BT. Sembcorp Cogen has commenced legal proceedings in the High Court to assert its ownership of these reserves.

The carrying book value of the gasoil reserves that Sembcorp Cogen has stored with HLT stood at SGD94 million as at Dec. 31, 2019, BT discloses.

BT notes that the court order was obtained days after SCI said on April 22 that the power generation unit has scrapped a more than decade-old gasoil supply and storage (GSS) deal with HLT to safeguard its interest.

Under the GSS agreement, the trading firm sold gasoil reserves to Sembcorp Cogen, and stored and managed them on the latter’s behalf, to fulfill certain regulatory requirements under Sembcorp Cogen’s electricity generation licence, BT says.

Court documents filed on April 17 for HLT’s moratorium order revealed that SCI had issued a notice to the trading firm demanding that the cargo (gasoil) not be discharged and that its inventory is consolidated into dedicated tanks and demarcated.

The Business Times (BT) reported last week that HLT has since withdrawn its application for the debt moratorium and decided to file for judicial management instead. The firm is grappling with a debt pile of some US$4 billion.

Universal Terminal is 41 per cent owned by the family of Hin Leong founder Lim Oon Kuin or OK Lim. China’s oil giant PetroChina and Australia’s Macquarie Asia Infrastructure Fund own 25 per cent and 34 per cent respectively.

Oil giants Vitol and China’s state-run Sinopec are among several industry titans eyeing a stake in the oil storage terminal, BT reported on April 24.

About Hin Leong

Hin Leong Trading (Pte.) Ltd. provides petroleum products and transportation services. The Company offers oil, lubricants, grease, and diesel products, as well grants storage, terminalling,
trucking, and marine logistics services. Hin Leong Trading serves customers globally.

Hin Leong Trading and shipping unit Ocean Tankers (Pte.) Ltd. filed for court protection from creditors on April 17, 2020, as the former struggles to repay debts of almost US$4 billion.

Hin Leong posted a positive equity of US$4.56 billion and net profit of US$78 million in the period ended October 31, according to the people, who asked not to be identified as the matter is
sensitive, according to Bloomberg News.

But Hin Leong told its creditors this month that total liabilities reached US$4.05 billion as of early April, while assets were just US$714 million, leaving a hole of at least US$3.34 billion, according to screenshots of the presentation to a group of bankers seen by Bloomberg News.

The balance sheet of the company showed no equity at all as of April 9, 2020, and warned that “figures obtained from the company are subject to verification,” Bloomberg News added.

As reported in Troubled Company Reporter-Asia Pacific on April 24, 2020, The Financial Times said that Hin Leong is seeking to appoint PwC as an independent manager to run the business as it pursues a debt restructuring of almost $4 billion. The company will withdraw the bankruptcy protection filing it submitted on April 17 and instead ask Singapore’s High Court to appoint PwC as a third party to run the company, a process known as judicial management.

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