CAO investors' options thin
Lawyer warns action against firm or Beijing parent is unlikely to succeed
Hundreds of small investors in China Aviation Oil (Singapore) Corp (CAO) who met last night to weigh up possible legal action over the firm's US$550 million derivatives loss have been advised by the Securities Investors Association of Singapore that options are limited.
'Simply put - very difficult,' the 63,000-member association's president David Gerald said.
Engeling Teh Practice lawyer Karish Kumar told yesterday's shareholder meeting that action could possibly be taken against CAO, its Beijing-based parent and company directors. But in each case, he warned, the likelihood of success was extremely limited.
'I'm sorry I am not able to hold out more hope for you,' Mr Kumar told investors.
Mr Gerald also warned them against taking legal action before CAO's scheme of arrangement was presented to creditors. 'Don't sue yet because we need to get the company back on its feet,' he said.
CAO applied for court protection earlier this month after raking up the losses, sparking Singapore's biggest financial crisis since rogue trader Nick Leeson broke Barings Bank in 1995.
Potential lawsuits from investors are not the only legal problem facing CAO and its parent, China Aviation Oil Holding Co (CAOHC).
Both companies are also being sued by a group of Indonesian businessmen over the collapse earlier this year of CAO's US$220 million bid to buy a stake in a Singapore oil refiner.
The Indonesians' firm, Satya Capital, is seeking damages of more than S$47 million ($222.18 million) from CAO and CAOHC after the deal to buy 20.6 per cent of Singapore Petroleum Corp collapsed.
CAO has until the end of this month to file a legal defence to the Satya claim.
CAO's creditors, which are owed more than US$247 million, could at any stage decide to apply to the High Court to have the firm put into judicial management.
Most creditors have so far been willing to work with CAO financial adviser Deloitte & Touche, which is putting together a scheme of arrangement. But the creditors still have the option of forcing CAO into judicial management.
One creditor, Standard Bank London, has already filed a statutory demand against CAO for US$14.4 million, which if triggered would put the Singapore company into liquidation.
A syndicate of 10 banks led by Societe Generale is also owed about US$152 million, the amount outstanding on a US$160 million five-year loan negotiated last July.
The suspended chief executive of CAO, Chen Jiulin, told the High Court last month that the company had used up US$120 million of the syndicated loan as early as October 10 to meet margin calls on its derivatives trading.
