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Hin Leong, the distressed Singapore oil trader that has admitted to $800m of undisclosed losses, is seeking to appoint PwC as an independent manager to run the business as it pursues a debt restructuring of almost $4bn.
The company will withdraw the bankruptcy protection filing it submitted last week and instead ask Singapore’s High Court to appoint PwC as a third party to run the company, a process known as judicial management, according to people familiar with the situation. A virtual court hearing will be held in the next few days.
Under judicial management, PwC, which is already advising the trader on negotiations with lenders, would run the company’s property, business and affairs as it tries to restructure a debt load of $3.85bn. PwC did not immediately respond to requests for comment.
HSBC is the bank with the biggest exposure to Hin Leong at $600m, followed by ABN Amro at $300m, while Société Générale has lent the company $240m. Three Singaporean banks — DBS Group, OCBC Bank and United Overseas Bank — have exposure of $680m.
The switch in legal strategy follows a tumultuous week for one of Asia’s largest shipping fuel traders. Singapore’s police has launched a probe into Hin Leong after billionaire founder Lim Oon Kuin said he had directed the company’s finance department not to disclose $800m of losses sustained in futures markets. In court filings, he also revealed that oil pledged as collateral for loans had been sold to raise cash.
The collapse of Hin Leong has sent shockwaves through the commodity trading industry.
Hin Leong’s lenders had been expected to push for judicial management over bankruptcy protection to avoid having members of the founding family manage the business during a debt restructuring, according to people familiar with the situation.
Evan Lim, Mr Lim’s son, is a Hin Leong director and runs Ocean Tankers, the family’s shipping business that has also filed for bankruptcy protection. Its application will not be withdrawn, according to a person familiar with the matter.
Under judicial management, which typically last about six months, Hin Leong would be protected from any legal action while it seeks to put its finances in order. After 60 days the interim manager has to put a debt restructuring proposal to creditors for approval.
However, the move to appoint PwC could yet be opposed by lenders seeking a more independent third party.
“Are PwC conflicted because they were originally appointed by the family?” asked one banker.
PwC was hired by Hin Leong this month to assist in its debt restructuring.
Five years ago the firm was involved with Noble Group, the Singapore-listed commodity trader that almost collapsed in an accounting and debt scandal before pushing through a dramatic financial restructuring. PwC was hired by Noble to review how the company recorded profits on long-term supply agreements and concluded they were consistent with industry practice.
Hin Leong, Ocean Tankers, Mr Lim and Evan Lim did not immediately respond to requests for comment. Rajah & Tann, one of Hin Leong’s legal advisers, said it was unable to comment because the matter was before the courts.
Separately, Deloitte — which was appointed Hin Leong’s auditor in 2003 and signed off on the financial statements that Mr Lim said failed to record losses — said it stood “behind the quality of its work”.
“Our audit was performed with the highest standards of audit and compliance with the information made known to us at the time,” Deloitte said, adding it could not comment further because of client confidentiality.