Bloomberg News reports that the prospects for HSBC Holdings Plc and other banks to recover losses from a failed Singapore oil trader are dimmer than originally thought after an accounting review found the energy firm overstated assets by $3 billion and fabricated documents on a “massive scale.”
Hin Leong Trading (Pte) Ltd. has assets of about $257 million, or 7% of its estimated $3.5 billion in liabilities, the company’s interim managers said in a report to Singapore’s High Court on June 23, Bloomberg relays. That’s less than half the assets estimated by founder Lim Oon Kuin and his son Evan Lim, according to earlier affidavits to the court.
According to Bloomberg, HSBC is among 23 banks owed almost $4 billion by Hin Leong, one of the largest traders in Singapore before its collapse in April following a plunge in oil prices that exposed what the report found were “manipulated” accounts and frequent double counting of cargo to keep credit lines flowing.
“The scale and regularity of the fabrication suggests that the practice was routine and pervasive,” the report, as cited by Bloomberg, found. “These forged documents enabled the company to mislead banks in extending financing to the company and also acted as supporting documentation for the fictitious gains and profits.”
The court filing was earlier reported by Reuters and Singapore’s Straits Times, Bloomberg notes.
Hin Leong “systematically manipulated its accounts to inflate the value of its accounts receivables” to present an exaggerated picture of its financial health, according to the report by PricewaterhouseCoopers LLC’s Chan Kheng Tek and Goh Thien Phong, Bloomberg relays. Chan and Goh, who were appointed in April as interim judicial managers to oversee the company, added that Hin Leong has “no reasonable prospect” of rehabilitation as a standalone entity, adds Bloomberg.
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.
On April 27, the Company was granted interim judicial management by the the Singapore High Court. Goh Thien Phong and Chan Kheng Tek of PricewaterhouseCoopers Advisory Services (PwC) have been appointed as interim judicial managers.