Hamburg Commercial Bank (HCB) told a Singapore court that it had the full support of the Xihe Holding’s judicial managers when it applied to arrest one of the struggling shipowner’s aframax tankers.

The arrest of the 108,900-dwt Ocean Pegasus (built 2009) on 23 February raised questions in the city-state as to how the ship managed to get arrested in the same jurisdiction that had granted Xihe and its assets protection from creditor action.

Concerns were raised that it could lead to the arrest of more of Xihe’s tankers as they returned from anchorages in the South China Sea, where most have been idling for the past year.

In its affidavit filed with the High Court of Singapore, HCB acknowledged that it was aware of the protection order granted to Xihe’s vessels but said it had obtained the consent of the judicial managers of both the shipowner, as well as charterer Ocean Tankers.

Consent letters sent via lawyers representing the judicial managers were attached to HBC’s affidavit, with Ocean Tankers agreeing on the understanding that the present crew it has employed on the Ocean Pegasus will be replaced, repatriated or employed by a new agent or manager by 30 April 2021 at the latest.

HBC also noted that the tanker would be sold via a competitive judicial auction, with the proceeds to be distributed pursuant to the directions of the Singapore Court.

Loan package

The sale of the Ocean Unicorn to Union Maritime in December 2020 left Hamburg Commercial Bank with a $17.5m shortfall on a $33m loan package. Photo: Piet Verspui/MarineTraffic

HBC lodged a $17.5m mortgage claim against the ship, but the auction sale is unlikely to net it the full amount.

The claims stem from a $33m mortgage package the bank extended to two vessel-owning special purpose vehicles (SPV) controlled by Xihe in November 2019. Each SPV received $16.5m.

Dong Fang Shipping & Trading was the registered owner of the Ocean Pegasus, while Da Guang Tankers owned the 108,900-tanker Ocean Unicorn (built 2009). Xihe acted as the guarantor.

It was agreed that the vessels were to be bareboat chartered to Ocean Tankers with the hire payable to HCB. These charters could not be terminated without the prior written approval of the bank.

HCB claimed that the loan covenants went into default in May 2020, shortly after the oil trading and tanker empire controlled by Singaporean tycoon Lim Oon Kuin ran into serious financial difficulties.

In December 2020 the Ocean Unicorn was sold to Union Maritime for $15.7m. After receiving its share of the sale proceeds, HCB was left with a $17.5m shortfall on the full loan package amount.

VesselsValue assesses the Ocean Pegasus to be worth $16.5m. However, ships sold at auction usually sell at a discount to their market value.

Also waiting in the wings is French bank Natixis, which has filed four cargo claim writs against the Ocean Pegasus for misdelivered cargo that it carried while the ship was on charter to Ocean Tankers in March 2020.

HBC said it believed its claim against the ship “would rank higher in priority than the alleged aforesaid statutory liens in Natixis’ favour” and therefore no other creditor’s rights would be unjustly affected by its exercising of its rights as mortgagee of the vessel.