Collapsed oil trader Hontop Energy has been accused by its biggest lender of “suspicious transactions” in the latest scandal to rock Singapore’s commodity sector.
Malaysian bank CIMB made the allegations in a court affidavit requesting the appointment of an independent supervisor to oversee Hontop so creditors can try to hammer out a restructuring agreement.
Singapore’s High Court granted the application last week, according to a filing seen by the Financial Times, and named accountants RSM as interim judicial managers. Hontop has debts of more than $500m and owes CIMB $106m.
The latest scandal to hit the global commodity hub in Singapore has fuelled questions about its regulatory framework and oversight of trading houses.
Hontop, which is part of Chinese conglomerate Wanda, ran into financial difficulties this year when banks including DBS and Macquarie started to demand repayment of loans. It went into receivership in February.
The affidavit shows that Hontop used CIMB to finance two crude deals with UK-based oil company BP.
In one of the transactions, CIMB lent Hontop money to buy 476,000 barrels of crude from Sugih Energy International — now called Aeturnum Energy — which Hontop told the bank it planned to sell to BP.
However, when CIMB approached BP for payment it was told the cargo was subject to an unspecified “framework agreement” with Hontop and that because the UK oil group was owed money “BP was not obliged to pay the company or the bank for the cargo”.
In the second deal, CIMB agreed to finance the purchase of 1m barrels of oil from Sugih to sell on to BP. However, when the bank sought confirmation with BP it was told there was “no record whatsoever of the sale contracts”.
Further investigations by CIMB revealed that documents and messages it had relied upon to approve the loan to Hontop may “have been materially altered from the original and/or forged”.
CIMB “believes there is a real need for independent court-appointed officers to investigate, take immediate remedial and preventive action to stem any further harm, loss and damage which could in any way prejudice the creditors’ interest,” the bank said in its affidavit. “This is particularly important in light of the suspicious transactions referred to above.”
CIMB and BP declined to comment on the issue, which was first reported by Reuters. Sugih did not respond to a request for comment. Hontop and its law firm TSMP did not immediately respond to requests for comment.
The string of scandals has raised the prospect of a liquidity crunch in Singapore’s commodities sector, threatening a wave of defaults and bankruptcies as banks cut their exposure to all but the biggest companies.
Concerns were heightened after Hin Leong — with a debt load of $4bn — disclosed what remains one of the largest trading failures in the city-state.
The Monetary Authority of Singapore, the de facto central bank, and the banks association said last week that lenders were developing “a set of best practices” in consultation with trading companies, to “strengthen Singapore’s resilience, relevance and competitiveness as a global commodities trading hub”. They did not give details.