Tainted CAO back in business
A newly created subsidiary of China Aviation Oil (Singapore) Corp (CAO) is wrapping up its first jet-fuel deal since the company sought court protection earlier this month over US$550 million of derivatives losses.
By last night, it was understood that CAO was expected to have signed agreements for 80 per cent of the tender for the supply of 460,000 tonnes of jet fuel to be delivered to Shanghai and Tianjin airports in January and February.
The tender process had been delayed as a result of the complicated structure that had to be in place for its subsidiary to continue trading as an agency for CAO's Beijing-based parent, China Aviation Oil Holding Co (CAOHC).
Although the CAO subsidiary has been able to negotiate prices and administer the tender process, all contracts ultimately had to be signed by CAOHC and the supplying companies.
But the successful completion of the deal by CAO's wholly owned subsidiary CAOT will allow the Singapore-listed company to remain a player in the mainland's US$1 billion jet-fuel import business.
CAO's continued involvement in the jet-fuel business will also help the company in its efforts to come up with the restructuring package that it has to present to its creditors - which are owed close to US$250 million - in about five weeks.
To be able to operate as a jet-fuel procurement agency, CAOT has signed a fee-based service agreement with CAOHC that allows it to use CAO's Singaporean premises and some of its trading staff.
CAO's US$550 million derivatives loss is Singapore's biggest financial scandal since trader Nick Leeson broke Barings Bank in the mid-1990s.
CAO's suspended chief executive, Chen Jiulin, is under investigation by the Singaporean police.
The Singapore Stock Exchange has launched an investigation into the company's disastrous derivatives trading.
