Crude crash ruins Singapore oil tycoon
published : 1 May 2020 at 11:45
SINGAPORE: Singapore tycoon O.K. Lim built up his oil empire from a single-truck outfit through hard work and high-risk gambles, a rags-to-riches tale that made him a legend among crude traders.
But it all came crashing down when oil markets were plunged into unprecedented turmoil by the coronavirus pandemic and revealed the keen poker player appeared to have overplayed his hand.
Lim -- who projected a down-to-earth image but was, according to people who knew him, a "major risk-taker" -- dashed to court seeking protection from creditors for his firm Hin Leong Trading last month.
In a bombshell affidavit seen by AFP, Lim revealed the oil trader had "in truth... not been making profits in the last few years" -- despite having officially reported a healthy profit in 2019.
He admitted the firm he founded in the 1960s after emigrating from China had hidden $800 million in losses over the years, while it also owes almost $4 billion to banks.
Lim took responsibility for ordering the company, one of Asia's biggest oil traders, not to report the losses and also confessed it had sold off inventories that were supposed to backstop loans.
Hin Leong -- meaning "prosperity" in Chinese -- is one of the biggest industry casualties yet of the crude market collapse, and its demise last month marks an ignominious fall from grace for Lim.
- 'Major risk-taker' -
The businessman -- whose full name is Lim Oon Kuin -- started the company with a single delivery truck shortly before Singapore became independent in 1965.
It grew into a major supplier of fuel used by ships, and its rise in some ways mirrored Singapore's growth from a gritty port to an affluent financial hub.
The firm played a key role in helping the city-state become the world's top ship refuelling port, observers say, and it expanded into ship chartering and management with a subsidiary that has a fleet of more than 150 vessels.
The picture that emerges of Lim himself, now in his 70s, is complex.
On one hand, he was a low-profile individual who sought to project a humble image -- you would not know he was a wealthy tycoon if you saw him walking down the street, according to those who knew him.
But he maintained a firm grip on Hin Leong, with one oil trader in Singapore -- who spoke anonymously -- describing him as a "typical Asian patriarch making all the decisions for the family business".
Jorge Montepeque, a veteran crude market executive who did business with Lim for a decade until 2001, said the Hin Leong founder could appear "almost detached" in meetings, as if unaware of what was happening.
"But that's not true, he very much knows what is going on... The reality is that he has been a major risk-taker," he told AFP.
- 'Too big to fail' -
The firm's collapse has prompted a police investigation and sent shockwaves through the financial community, with a government agency offering assurances that the city-state's "oil-trading sector remains resilient".
The Singapore oil trade told AFP: "Nobody appeared to have thought that anything was amiss.
"The sentiment was that Hin Leong was too big to fail."
But it appears that taking risks and failing to hedge against a downturn came back to bite Hin Leong when it was hit by a double blow -- a Saudi-Russia price war and a virus-triggered demand shock.
Global oil demand has collapsed by around a third, according to some estimates, as the virus pandemic brings economic activity to a standstill.
A slide presentation made by Hin Leong for creditors before it went to court showed the company had total liabilities of $4.05 billion against assets of $714 million.
Bank debts of $3.85 billion comprised the lion's share of its liabilities -- with large sums owed to lenders including HSBC, Dutch bank ABN Amro and France's Societe Generale.
"What caught many by surprise was that they didn't have the cash. I mean, these guys were big," the oil trader said.
Hin Leong did not respond to requests to comment from AFP.
Lim has stepped down from his positions as director and managing director, although Hin Leong's final fate is still uncertain at this stage.
Observers say that the firm had likely hoped China would contain the virus and the oil market turmoil would be short-lived.
But such a strategy, said oil executive Montepeque, was like "taking all your assets and putting them all on the red on the casino roulette".
And after reading Lim's confessions, Montepeque said he believed the "game was up" for Hin Leong.