CIMB Alleges ‘Suspicious’ Oil Deals by Singapore Trader Hontop

Malaysia’s CIMB Bank Bhd. has accused Singapore-based Hontop Energy of “suspicious” oil deals as it seeks a restructuring of the trader and to recover funds lent to the group in the latest legal skirmish in the trading hub.

Banks that finance commodities trading in Singapore have found themselves with sizable exposures to failed traders as the market downturn crushed the value of collateral, exposing financial shortfalls and sparking accusations of fraud and dishonest dealings. Hontop went into receivership in February and applied in March for court protection for six months from winding up actions.

In the latest dispute, the Singapore branch of CIMB alleges that Hontop, which is wholly-owned by China’s Wanda Holding Group Co., conducted “suspicious” trades involving two Russian oil cargoes that the bank had financed, according to a Singapore court document seen by Bloomberg.

CIMB asked the Singapore High Court to appoint an interim manager, which is a form of corporate restructuring, and is seeking about $105 million from Hontop and Wanda. The trader’s total outstanding liabilities were $473 million as of late-February, according to the document.

Hontop is represented by TSMP Law Corporation, while CIMB is represented by Rajah & Tann Singapore LLP. Nobody answered calls to Hontop. Rajah & Tann, TSMP and CIMB declined to comment on the matter.

CIMB singled out in the court document two suspicious so-called back-to-back oil deals. The arrangement involved Hontop buying a cargo from one trader, Sugih Energy International Pte Ltd, and then selling it on to a unit of BP Plc in Singapore.

In one of those deals, CIMB issued a letter of credit to Sugih -- now known as Aeturnum Energy International Pte. -- and paid for the cargo on Honhop’s behalf. BP then informed CIMB that its payment was conditional upon a separate payment it was expecting first from Hontop, which had never been disclosed to the bank, according to the document.

BP declined to comment.

In the most high-profile fallout in Asia’s oil-trading hub this year, banks including HSBC Holdings Plc are seeking to recover hefty losses from the collapse of Hin Leong Trading (Pte) Ltd., which overstated assets by $3 billion and fabricated documents on a “massive scale.” Other firms caught out in the downturn include ZenRock Commodities Trading Pte Ltd., which is planning to wind down by August, and Agritrade International Pte.

©2020 Bloomberg L.P.

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