Ocean Tankers chief executive Evan Lim sent a letter to customers last Wednesday, assuring them that the company was unaffected by Hin Leong’s debt restructuring.
By Friday evening, a different story had emerged. Lim admitted in his affidavit filed with the High Court of Singapore that Hin Leong’s financial woes had heavily affected the company he leads.
He said that Ocean Tankers remained a solvent company with a healthy cash balance, but that the actions of Hin Leong put it in grave danger of being held accountable for the oil trader’s debts.
Banks that extended inventory financing facilities to Hin Leong for oil stored on ships operated by Ocean Tankers have asked for confirmation that the cargoes for which the bills of lading are made out in their favour remain on board the vessels.
However, Lim conceded that most, if not all, of the inventory had been sold by Hin Leong on his father Lim Oon Kuin’s instructions and could no longer be delivered to the banks holding the bills of lading.
Ocean Tankers could therefore be exposed to misdelivered cargo claims as high as $600m.
Similar misdelivered cargo claims from many other banks and oil traders still holding bills of lading for cargoes sold by Hin Leong and delivered by Ocean Tankers vessels against letters of indemnity could potentially add a further $2.07bn to the claims tally.
Type | Number |
VLCCs | 18 |
LR2/Aframax tankers | 12 |
LR1 product tankers | 5 |
MR product tankers | 20 |
Handysize product tankers | 4 |
Small coastal product tankers | 26 |
Bunker tankers | 26 |
Lubricant oil barges | 6 |
Source: Ocean Tankers
Legal action over these misdelivered cargoes has already begun. On Tuesday this week, the Singapore branch of India’s ICICI Bank issued writs against two of Ocean Tankers’ storage VLCCs, the 318,000-dwt Wu Yi San and Chang Bai San (both built 2012). The two ships departed their Tanjung Pelepas anchorage and headed into the South China Sea before any arrest warrants could be served on them.
Ocean Tankers fears its non-Hin Leong chartering activities will be severely affected if creditors take actions against the company or the vessels it charters or operates.
Charters to entities other than Hin Leong form 85% to 90% of all cargoes Ocean Tankers carries.
The company said it was unlikely that third-party clients would be keen to charter its vessels if it continued to be under financial distress without court protection.
“Due to the present buoyant market for oil tankers, Ocean Tankers believes that it would be able to generate a healthy profit on charters to third parties. Any arrest of the vessels chartered or operated by Ocean Tankers will precipitate the collapse of Ocean Tankers as the market would shun chartering Ocean Tankers-operated vessels,” Lim said.
Ocean Tankers estimated that if fully employed at current spot rates, its fleet would earn an aggregate gross profit of $2.79m per day.
Analysts at Jefferies said in their report this week that should Ocean Tankers’ 18 VLCCs be tied up for legal reasons, it would add fuel to the fire for VLCC rates.
Ocean Tankers also operates 12 LR2 aframaxes, five LR1 product tankers, 20 MR product tankers and many small to handysize product tankers, bunker tankers and lube-oil barges.
Lawyers closely following the Hin Leong saga said on Monday that they were unaware of any arrests involving Ocean Tankers’ vessels.
