Hin Leong Trading and Ocean Tankers have filed for protection under Section 211B of the Singapore Companies Act.
Section 211B, referred to as a Scheme of Arrangement, is the equivalent of Chapter 11 in the US.
It allows a company in financial distress and its creditors to find a solution to fulfil its debt obligations. The scheme is subject to the court’s supervision and sanction.
An interim 30-day moratorium automatically kicked in after Hin Leong and Ocean Tankers filed their applications in the High Court last Friday.
Within these 30 days, the two companies have to put forward a scheme to the court. Such schemes usually indicate that money will be coming in at some point in the future, or that a white knight will come to their rescue.
If their applications are approved, the court will issue a six-month moratorium restraining further legal action or proceedings against the companies, giving them breathing room as they work through the restructuring process.
The moratorium can be renewed if necessary. It is legally binding in all jurisdictions that have signed on to the UNCITRAL Model Law on Cross-Border Insolvency.
'Serious interest'
Rumours were rife last week that a white knight was waiting in the wings. Singapore’s sovereign wealth fund, Temasek Holdings, and Chinese state-run oil company Sinopec were among the names mentioned.
The court affidavits reveal that an oil-refining, gas and petrochemicals conglomerate headquartered in China has expressed serious interest in investing in both companies.
Several other prominent players in the oil sector were also said to have indicated their interest.
Should the companies fail to enlist the help of a white knight, or hash out a restructuring deal, their creditors may petition the court to place them under judicial management.
On Wednesday Bloomberg reported that Hin Leong was poised to withdraw its Section 211B filing and instead file for judicial management. Citing sources with knowledge on the matter, the news agency said accountants PricewaterhouseCoopers would act as the interim manager while the application was being processed.
Ocean Tankers would continue its application for court protection under Section 211B.
