HSBC loses up to USD 598.1 million in financing over alleged undisclosed losses at Hin Leong
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A DEEP DIVE IS NOW AVAILABLE FOR THIS LOSS EVENT
On 20 April 2020, it was reported that as of 9 April 2020, HSBC had been potentially defrauded of up to USD 598.1 million (EUR 550.4 million) in financing which it extended to the Singapore oil trader Hin Leong Trading (HLT). HLT is alleged to have hidden USD 800 million of losses from speculative trading in oil futures from its lenders including HSBC. HLT owes around USD 3.85 billion to more than 20 banks, Straits Times reports.
In its first-quarter 2020 earnings release, HSBC reported a USD 700 million increase in expected credit losses in Asia, mostly related to a single unnamed company in Singapore, as reported by Bloomberg Quint.
In the first half of April 2020, it was reported that some lenders had stopped issuing new letters of credit to HLT over debt repayment concerns. HLT filed an application to the Singapore High Court for bankruptcy protection on 17 April 2020, as reported by Business Standard. HLT’s founder and director Lim Oon Kuin, known as OK Lim, said in an affidavit filed with the Singapore High Court dated 17 April 2020 that he had instructed the firm’s finance department not to disclose USD 800 million of losses incurred in futures markets over several years. OK Lim’s son Evan Lim, who is also a director of HLT, said he was not “personally aware of how and why” the losses were not disclosed as he was not involved in the finance function which was supervised by his father.
OK Lim said in the court filing that HLT had not been making profits for the last few years, although HLT’s financial statements for 2019 showed a net profit of USD 78 million, Business Standard reports. Under Singapore Accounting and Corporate Regulatory Authority rules, as a private company in Singapore, Hin Leong is exempted from filing financial statements. HLT recorded payments to meet margin calls as accounts receivable after oil prices fell by two-thirds in the first quarter of 2020 and bank credit lines tightened. HLT sold a substantial part of the inventory being financed by banks to raise cash and did not sufficiently hedge its exposure to a fall in oil prices, OK Lim said.
As of 17 April 2020, the Singapore police had launched an investigation into Hin Leong. HLT was placed under judicial management on 12 May 2020.
The following banks are listed in court documents as having exposure to, or have filed claims against, HLT according to Reuters and the Financial Times:
HSBC: USD 600 million
ABN AMRO: USD 300 million
DBS: USD 290 million
OCBC Bank: USD 250 million
Société Générale: USD 240 million
Standard Chartered Bank: USD 240 million
Rabobank: USD 230 million
Bank of China: USD 210 million
ANZ Group: USD 190 million
Natixis: USD 160 million
Sumitomo Mitsui Banking Corporation: USD 140 million
United Overseas Bank: 140 million
CIMB Bank Berhad: USD 123.7 million
ICICI Bank: USD 100 million
Crédit Agricole Corporate and Investment Bank: USD 100 million
CTBC Bank: USD 100 million
Unicredit: USD 90 million
Qatar National Bank: USD 70 million
Deutsche Bank: USD 70 million
Westpac: USD 60 million
ING: USD 50 million
JPMorgan: USD 50 million
DZ Bank: USD 32.2 million
UPDATE
20 April 2020: spglobal.com publishes court records. Loss amount changed from USD 600,000,000 to 598,071,955. Headline and paragraph 1 amended. Date First In Media changed from 21 April 2020 to 20 April 2020. CIMB Bank Berhad and DZ Bank added to the list of affected banks.
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