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Singapore’s oil trading haven defaced by latest Hin Leong bankruptcy

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4 years ago

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Singapore has long been known as the ideal location for a commodity trading house due to its light regulation, low taxes and a view of one of the busiest shipping routes globally.
That well-earned reputation is now marred by a slew of financial scandals and failures. The most recent is the bankruptcy of the legendary marine fuel trader, Hin Leong Trading Pte who admitted to hiding around US$800 million (S$1.13115 billion) in losses as well as selling off oil inventories which were backstopping loans.
Only weeks prior to the failure of Hin Leong, the palm oil and coal mining corporation, Agritrade International Pte collapsed as it was mired in fraud allegations. At around the same time, an oil trader connected to a Chinese refiner, Hontop Energy Pte entered receivership even as it blamed plummeting demand due to the COVID-19 pandemic.
Only a few years ago, the Singapore-listed firm, Noble Group Ltd, which used to be Asia’s biggest commodities house, was forced into a court-sanctioned restructuring amidst allegations of aggressive accounting practices.
An accounting professor specialising in corporate governance at the National University of Singapore, Mak Yuen Teen said: “The collapse of commodities traders like Noble, Hin Leong and Agritrade hurts our reputation.”
Speaking to Bloomberg, he pointed out “Our rules, monitoring and enforcement for companies are weak – and we are now paying a heavy price,”
For observers like Professor Mak, Singapore’s regulatory and legal oversight of trading houses is now in question regarding its strength. Substantial amounts of financing by banks are required by trading houses for them to buy, blend, store and transport raw materials.
The necessarily secretive and risky modus operandi of the traders who strive to succeed on razor thin margins are the problems. It is just coincidental that most of these traders choose to operate in the country.
Regardless, collateral damage happens across the system when a trading house goes bust.
Financial Scandals
Singapore is no stranger to financial scandals. In 1995, Barings Bank was thrust into bankruptcy when the original rogue trader, Nick Leeson’s made unauthorized bets on the Japanese stock futures.
Since then, many other commodity scandals emerged. These include Mitsubishi Corp. trader incurring US$314 million (S$443.84 million) loss in 2019 as well as China Aviation Oil incurring US$550 million (S$777.42 million) loss in 2004.
According to Trade and Industry Minister Chan Chun Sing in a Bloomberg TV interview last week, he opined that the wider market will not be affected by Hin Leong’s collapse and the country’s reputation has not yet been dented.
The spokesperson for Enterprise Singapore stated that the government is forceful against unlicensed and illegal trading activity, which incurs penalties such as imprisonment and fines.
Apart from that, the country’s clear and tested set of insolvency laws allow for companies to orderly wind down, which can prevent systemic contagion, the spokesperson added in the email. Thus, the country remains an attractive spot for trading houses.
From zinc to oil traders, all of them said that their bankers were pulling back short-term loans. Financing costs have increased and banks are demanding more collateral and they will not issue letters of credit to some smaller firms in certain cases. Lenders said that they are lending primarily only to the biggest traders and cutting short-term loans to some clients so that exposure risk can be minimized.
Low taxes
Trading firms all over world have been enticed by Singapore to rent office space and hire well-educated local workers. Corporate tax rates for traders are only 5 per cent, which is lower than the 13 per cent rates offered in Switzerland itself.
Thus, Enterprise Singapore website states that between 60 per cent to 80 per cent of the top global oil, metals and agricultural companies are in the island country.
Police probes
For three years, Singapore regulators have attracted criticism for being slow to react to problems. Noble has drawn criticism from an ex-employee and short-sellers like Muddy Waters when the authorities launched an investigation in 2018.
The investigation did not yield any chargers or allegations. According to an email by a Singapore Police Force spokeswoman, investigations are still running and no additional information is available currently.
Hin Leong is currently under investigation after the company disclosed to creditors that its early-April’s liabilities were US$4.05 billion (S$5.72 billion) against an asset backdrop of just US$714 million (S$1.009 billion). This means there is a deficit of US$3.34 billion (S$4.72 billion).
On Tuesday (28 April), PricewaterhouseCoopers LLC has been approved by Singapore’s High Court as interim judicial manager of Hin Leong. With this, the company’s finances and negotiations with creditors will be handled by PricewaterhouseCoopers LLC.
Due to its classification as an “exempt private company” with less than 20 members without any corporations holding beneficial interest in its shares, Hin Leong does not need to file financial statements. In its 2019 financial year, the company announced revenue of more than US$20 billion (S$28.27 billion).
“How can a company with $20 billion revenue and this amount of assets and liabilities be an exempt private company? This is a serious deficiency in our regulation. There are so many stakeholders who will be affected by this,” Professor Mak lamented.

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ST Telemedia Global Data Centres reinforces commitment to Digital India with US$3.2 billion investment

ST Telemedia Global Data Centres (STT GDC) is investing US$3.2B to expand its data centre capacity in India by 550MW, tripling its IT load. The move supports India’s growing digital economy and aligns with PM Modi’s Digital India vision, discussed during his recent visit to Singapore.

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1 week ago

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6 September 2024

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ST Telemedia Global Data Centres (STT GDC), a leading data centre colocation services provider headquartered in Singapore, has announced a major investment of US$3.2 billion (INR 26,000 crores) to significantly expand its data centre capacity in India.

This investment will add 550MW of data centre capacity over the next 5-6 years, nearly tripling the Temasek-backed company’s IT load capacity to meet the increasing demands of India’s rapidly growing digital economy.

The expansion is set to support the surge in data consumption, cloud computing, digital transformation, and the adoption of artificial intelligence (AI) applications across India. STT GDC, which already holds a 28% market share in India by revenue, views this move as a reflection of its confidence in the country’s digital infrastructure needs and the broader vision of Digital India.

“India’s digital economy is growing at almost three times the overall GDP growth rate and is expected to reach US$1 trillion by 2027-2028,” said Bruno Lopez, President and Group CEO of STT GDC.

“As we celebrate our 10th anniversary, this ambitious expansion underscores our commitment to Digital India, and we are confident in our ability to contribute to its long-term success.”

STT GDC India, majority-owned by STT GDC in partnership with Tata Communications Ltd, currently operates 28 data centres across 10 cities with a total capacity of over 318MW.

It serves approximately 1,000 enterprise clients, including many Fortune 500 companies. STT GDC India has also been recognized as a Great Place to Work for five consecutive years and is ranked among the Best Places to Work in Asia.

The announcement follows STT GDC’s participation in a Business Roundtable with Indian Prime Minister Narendra Modi on 5 September 2024, hosted by the Singapore Business Federation.

This strategic engagement further emphasizes STT GDC’s commitment to supporting India’s digital transformation through long-term investment and collaboration.

Prime Minister Modi’s visit to Singapore resulted in various agreements across key sectors, including a healthcare cooperation agreement between India and Singapore to collaborate on healthcare delivery, medical research, and digital health solutions.

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Giant to shut Toa Payoh supermarket in September, ninth closure in 2024

Supermarket chain Giant will shut its ninth store in Singapore by September 2024, citing tough competition from online retailers and grocery rivals. The Toa Payoh outlet is part of a series of closures this year, reflecting broader regional challenges for its parent company, Dairy Farm International (DFI).

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1 week ago

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6 September 2024

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SINGAPORE: Supermarket chain Giant will close its ninth store in Singapore by September 2024 as it faces intense competition from online retailers and other grocery chains.

The store, located in Toa Payoh Lorong 4, is the latest in a series of closures that have taken place this year, as reported by The Straits Times.

Since February, Giant has shut down a hypermarket in Sembawang Shopping Centre, supermarkets in Bishan, Ang Mo Kio, and Bukit Panjang, along with four smaller “Express” stores in Nanyang Technological University, Pasir Ris, Redhill, and Punggol.

Following the closure of the Toa Payoh outlet, Giant will operate 45 stores across Singapore, down from 53 earlier this year.

Despite these reductions, the grocer has also opened a new outlet in Tengah in 2024.

From 2020 to 2023, the number of Giant stores in Singapore remained relatively stable, hovering between 53 and 55.

However, the recent closures highlight broader challenges faced by its parent company, Hong Kong-based Dairy Farm International (DFI), which has seen a contraction in its regional presence.

DFI, which first entered the Malaysian grocery market in 1999, exited the country in March 2023 by selling its stake in GCH Retail, the operator of the Giant, Mercato, and Giant Mini chains.

Similarly, in 2021, PT Hero Supermarket, a retail group majority-owned by DFI, closed all of its Giant supermarkets in Indonesia after the group’s revenue fell by 34% year-on-year.

In April, the Business Times reported that DFI had put the 9,731 sq ft Housing Board retail unit in Toa Payoh, currently occupied by Giant, up for sale at a guide price of S$16.5 million.

The company stated that the sale was part of a strategy to reallocate resources and focus on improving customer experience in other stores.

DFI’s half-year earnings report published on 1 August 2024 revealed that its food operations in Singapore experienced declining sales due to challenging consumer sentiment.

Despite this, the group posted underlying profit growth, reaching US$76 million.

The company attributed this profitability boost to an improved product margin mix and effective cost control measures.

In response to the Singapore’s Toa Payoh outlet closures, a DFI spokesperson told ST that the company continuously evaluates its store network and adapts to market trends and consumer needs.

“Giant and Cold Storage remain core businesses of DFI Retail Group, and our commitment to growth and expansion in Singapore remains unchanged,” the spokesperson added.

According to DFI’s official website, the group operates in 13 countries and territories, with around 11,000 outlets and a workforce of approximately 200,000 employees.

In Singapore, DFI operates not only Giant supermarkets but also 7-Eleven convenience stores and the Guardian health and beauty chain.

The group’s parent company, DFI Retail Group Holdings Limited, is incorporated in Bermuda and is primarily listed on the London Stock Exchange under the equity shares (transition) category, with secondary listings in Bermuda and Singapore.

DFI’s businesses are managed from Hong Kong by DFI Retail Group Management Services Limited, through its regional offices. The group is a member of the Jardine Matheson Group.

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