HSBC has little chance of recouping Hin Leong losses

The prospects for HSBC and other banks to recover losses from a failed Singapore oil trader are dimmer than originally thought, after an accounting review found the energy firm overstated assets by US$3 billion and fabricated documents on a “massive scale”.

Hin Leong Trading has assets of about US$257 million, or 7 per cent of its estimated US$3.5 billion in liabilities, the company’s interim managers said in a report to Singapore’s High Court on Tuesday. That is less than half the assets estimated by founder Lim Oon Kuin and his son Evan Lim, according to earlier affidavits to the court.

HSBC is among 23 banks owed almost US$4 billion by Hin Leong, one of the largest traders in Singapore before its collapse in April following a plunge in oil prices that exposed what the report found were “manipulated” accounts and frequent double counting of cargo to keep credit lines flowing.

“The scale and regularity of the fabrication suggests that the practice was routine and pervasive,” the report found. “These forged documents enabled the company to mislead banks in extending financing to the company and also acted as supporting documentation for fictitious gains and profits.”

HSBC, the London-based bank with the most exposure to Hin Leong at about US$600 million, declined to comment on the report. Hin Leong did not respond to email inquiries seeking comment. The court filing was earlier reported by Reuters and Singapore’s The Straits Times.

Hin Leong “systematically manipulated its accounts to inflate the value of its accounts receivables” to present an exaggerated picture of its financial health, according to the report by PwC’s Chan Kheng Tek and Goh Thien Phong. Chan and Goh, who were appointed in April as interim judicial managers to oversee the company, added that Hin Leong has “no reasonable prospect” of rehabilitation as a stand-alone entity.