HSBC and a clutch of other banks have a combined exposure of at least $3 billion (Dh11bn) to Singapore’s Hin Leong Trading, and are in talks with the privately-held oil trader over shoring up its finances, according to people with knowledge of the matter.
A group of about 10 lenders including HSBC, Singapore’s three largest banks, Standard Chartered and Deutsche Bank held a virtual meeting with the oil trader and its advisers on Tuesday, the people said, asking not to be identified because they aren’t authorized to speak publicly. HSBC has the biggest exposure to Hin Leong at about $600 million, they added.
Singapore’s closely-knit oil trading community is gripped by speculation over the predicament of one of its biggest players and the potentially far-reaching impact its difficulties could have on the market and trading partners. Before crude’s spectacular crash due to the coronavirus crisis, it would have been almost unfathomable that a company of Hin Leong’s status could be in such a position.
Bloomberg reported last week that some banks wouldn’t issue new letters of credit to the trader because of concern over its ability to repay the short-term debt. Nobody responded to calls or emails to the company seeking comment.
DBS Group Holdings, Singapore’s largest lender, has an exposure of about $300m to Hin Leong, while its local competitors Oversea-Chinese Banking Corp and United Overseas Bank are owed at least $100m each.
Representatives for HSBC, Standard Chartered, Deutsche Bank and the three Singapore lenders declined to comment.
Among the measures discussed at the Tuesday meeting were debt reduction, extending loan maturities and some form of moratorium on repayments, according to one of the people.
The banks are planning to come back early next week on possible solutions, and will likely appoint an adviser to help them in their negotiations, another person said.
The Monetary Authority of Singapore, the nation’s financial regulator and central bank, last week eased capital requirements to give banks more leeway to bolster lending during the coronavirus-fuelled slowdown.
Founded by legendary self-made Chinese tycoon Lim Oon Kuin, Hin Leong could be the latest casualty of the collapse in oil prices and a heightened caution among lenders to finance commodity trades.
The company was established in 1963 and has grown into one of Asia’s largest suppliers of ship fuel, or bunkers. OK Lim, as the founder is known, built the company from a one-man, one-truck oil dealer to a regional powerhouse with assets including 130 vessels and businesses across oil trading, terminal and storage, bunker supply and lubricants manufacturing, according to its website.
The company’s bunkering arm, Ocean Bunkering Services, was ranked the third-largest shipping fuel supplier in Singapore last year, according to the city-state’s Maritime and Port Authority. Singapore is the world’s biggest shipping fuel bunkering hub.
Letters of credit are a critical financial lifeline for commodity traders, used as a way of financing short-term trade. A bank issues the letters on behalf of the buyer as a guarantee of payment to the seller. Once the goods have exchanged hands, the buyer repays the lender.
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
- In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
- Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
- Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
Match info:
Burnley 0
Manchester United 2
Lukaku (22', 44')
Red card: Marcus Rashford (Man United)
Man of the match: Romelu Lukaku (Manchester United)
Super Bowl LIII schedule
What Super Bowl LIII
Who is playing New England Patriots v Los Angeles Rams
Where Mercedes-Benz Stadium in Atlanta, United States
When Sunday (start time is 3.30am on Monday UAE time)
Frankenstein in Baghdad
Ahmed Saadawi
Penguin Press
UAE currency: the story behind the money in your pockets
Results
6.30pm: Dubai Millennium Stakes Group Three US$200,000 (Turf) 2,000m; Winner: Ghaiyyath, William Buick (jockey), Charlie Appleby (trainer).
7.05pm: Handicap $135,000 (T) 1,600m; Winner: Cliffs Of Capri, Tadhg O’Shea, Jamie Osborne.
7.40pm: UAE Oaks Group Three $250,000 (Dirt) 1,900m; Winner: Down On Da Bayou, Mickael Barzalona, Salem bin Ghadayer.
8.15pm: Zabeel Mile Group Two $250,000 (T) 1,600m; Winner: Zakouski, James Doyle, Charlie Appleby.
8.50pm: Meydan Sprint Group Two $250,000 (T) 1,000m; Winner: Waady, Jim Crowley, Doug Watson.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
