Singapore oil trader Zenrock is said to be winding-up by August, according to a report by Bloomberg. This comes as a result of the oil price crash, which saw COVID-19 driving prices to historic lows.
ZenRock Commodities Trading Pte Ltd is alleged by HSBC Holdings plc to be involved in a series of “highly dishonest transactions” that included the company using the same cargo of oil to obtain more than one loan from banks, according to court documents. HSBC has an exposure of almost US$49 million to Zenrock.
The company is expected to hand over responsibilities to a judicial manager. KPMG LLP was named interim judicial manager in May, just as ZenRock was raided by Singapore police following the allegations.
HSBC’s allegations come in the wake of several high-profile cases in recent years of traders using the same commodities as collateral for several loans. In 2014, Standard Chartered and Citigroup lost millions after a Chinese metals trader pledged the same stockpile three times.
ZenRock is the latest oil trading house in Singapore to collapse, following the spectacular implosion of major trader Hin Leong earlier in April. Hin Leong, embroiled in a similar commodities fraud case, is said to owe major lenders including HSBC, CIMB and other banks a combined total of US$4 billion.
Singapore is one of Asia’s largest shipping fuel trading centers and the world’s biggest bunkering hub with around 50 million metric tonnes of sales annually. The plunge in crude prices and economic slowdown has prompted lenders to tighten credit lines and call in their debts as the collateral value shrank. This brought more issues to the surface as more companies struggled to pay up.