Hin Leong Group was founded by Singapore billionaire Lim Oon Kuin in 1963.

Lim was Singapore's 18th richest man in 2019 according to Forbes with a net worth of US$1.65 billion (S$2.35 billion).

You can read more about the Lim family's journey from owning a small fishing boat to becoming one of Singapore's largest independent oil traders on their company profile.

They have been in the spotlight for owing S$5.5 billion to several banks.

As recently as the end of business year 2019, the company had reported a profit of S$103 million.

So how did they end up in such a devastating turnaround?

But the two main things you have to know about Hin Leong for this article is that they are oil traders and they have a sister company, Ocean Tankers.

As oil traders, they specialise in trading oil, which usually involves oil futures.

Oil futures are contracts where someone agrees to exchange a set amount of oil at a set price on a set date.

So back to the S$103 million profit for Hin Leong in the financial year ending 2019.

It turns out there was a big chunk of losses not stated in the financial records.

Reuters reported on the existence of an affidavit where Lim went into detail over the actual state of Hin leong, as well as the losses they had been suffering.

Lim had said in the filing that Hin Leong had "not been making profits in the last few years."

Bloomberg stated in a report that Hin Leong had suffered US$800 million (S$1.14 billion) in futures losses over the years which "were not reflected in the financial statements."

Lim stated in his filings that he had given instructions to the finance department to prepare the accounts without showing the losses and told them that he "would be responsible if anything went wrong.”

In a separate Bloomberg article, they noted that Hin Leong had not hedged against a price rout.

They further noted that Lim had made "the opposite bet", and that he had believed China would control the virus and that oil demand would recover as the year went along.

That has not seemed to be the case so far this year.

23 Banks

According to a more recent Reuters article, Hin Leong reportedly owes 23 banks a total of S$5.5 billion.

According to a CNA article citing Business Times, DBS has the highest exposure at around S$412 million among local banks, while OCBC Bank is owed about S$313 million, and UOB had let Hin Leong draw down more than S$142 million.

The Maritime and Port Authority of Singapore (MPA) and the Monetary Authority of Singapore (MAS) confirmed that the agencies are closely monitoring developments related to Hin Leong and the broader oil trading and bunkering sectors.

In their joint press release, they stated that the banking system remained sound.

So how did Lim get these loans?

According to a separate filing by Lim's son, Evan Lim Chee Meng, the company's oil inventories had been pledged as collateral to secure loans.

However, Evan stated that his father had sold a "chunk" of these oil inventories and used the money he got for general funds.

According to Forbes, citing a Financial Times, Evan stated what this meant in his filing:

“As a result, there is a large shortfall of inventory as compared to the quantum of inventory which has been secured in favour of the bank lenders who had provided inventory financing.”

So what's next

Hin Leong applied for court protection from lenders on April 17.

The Singapore police are currently investigating Hin Leong. According to the Straits Times, banks have reportedly filed applications for "charges related to irrevocable letters of credit tied to goods and documents of Hin Leong Trading."

Hin Leong and their shipping arm, Ocean Tankers, are also seeking a six-month moratorium, although they have since withdrawn their application.

Image from Hin Leong website