Zenrock, a Singapore-based trader of crude, oil products and petrochemicals, owes more than $600 million to creditors.
Following the collapse of oil trader Hin Leong, a new scandal is threatening to cut bank financing to commodity traders in the city-state. Zenrock owes at least six banks a total of $166.1 million and has outstanding balances of $449 million, according to a bankruptcy protection application filed last Wednesday, «Reuters» reported.
The creditor banks are said to be HSBC, Natixis, Crédit Agricole, ING Bank, Bank of China, and Banque de Commerce et de Placements, with HSBC having the largest exposure at $49 million. Other creditors include Total's trading arm Totsa, Thailand's state-controlled PTT and China's state-controlled PetroChina, BP and Shell.
In its application, Zenrock said its financial difficulties are the result of tumbling oil prices and disruptions to trading activity caused by the Covid-19 pandemic. It said it faces difficulties in collecting accounts receivable of $120.5 million because of a tightening credit market and increased caution by banks, «Reuters» reported.
«Highly Dishonest Transactions»
Last week, HSBC applied to the Singapore High Court to place the firm under judicial management, a form of debt restructuring. The bank alleged that Zenrock was involved in «highly dishonest transactions» to obtain loans.
The court approved the application in a virtual hearing last Friday, and appointed interim managers from KPMG, while lifting the moratorium relief.
Banks Scaling Back Exposure
The Monetary Authority of Singapore said in the wake of the Hin Leong scandal that it was «closely monitoring liquidity and credit conditions in the market» and reminded banks «not to de-risk indiscriminately from the bunkering and oil trading sectors.»
However, banks have already stopped or scaled back issuing letters of credit to smaller trading firms and are requiring cargoes to be pre-sold before issuing financing, according to a report by «Argus Media.»
