Oil Trader Zenrock Placed Under Judicial Management by Singapore High Court

Oil Trader Zenrock Placed Under Judicial Management by Singapore High Court

Last May 08, 2020, the High Court of Singapore approved HSBC and four other banks’ request to place global oil trader Zenrock under judicial management.

The swift decision came after the motion was filed by the banks last May 04, 2020, in connection with Zenrock’s failure to fulfill the required cash payment to immediately cover the unsecured loans that the oil trader had obtained from several banking institutions. According to Mr. Kiu Hock Yean, the head of HSBC’s Department of Commodities and Energy, their demand for payment came as a result of the sharp fall in the global value oil in the wake of the COVID-19 pandemic.

The demand for payment is part of the agreement when HSBC granted Zenrock a total of US$600 million in unsecured loan. Albeit unsecured, the loan was backed by the oil trader’s US$ 2 billion worth of global trading portfolio.

However, as it became apparent that Zenrock is currently indebted to as many as 23 banks, and with total debts already amounting to US$4 billion, HSBC and 4 other banks quickly filed a request for the High Court to place Zenrock under judicial management, in order to protect their interest and prevent further losses.

Zenrock’s Questionable Bank Dealings Strengthened HSBC’s Petition for Judicial Settlement

The four other banking institutions who jointly filed the application with HSBC, for Zenrock’s judicial management are: Bank of China, Banque de Commerce et de Placements, Credit Agricole and ING Bank.

Concerns over the oil trader’s ability to pay its unsecured obligations were raised when it was learned that Zenrock attempted to secure additional loans from other banks, which involved unlawful pledging of the same oil shipment specifically backing the loans granted by the five banks.

Despite documents submitted by HSBC as proof of Zenrock’s highly questionable actions, and while pending High Court’s naming of the judicial manager who will draw up plans for Zenrock’s debt-restructuring, the firm filed a counter-petition, which included a plea for moratorium of the related freeze order imposed on the oil trader’s assets.

Zenrock’s Aggregate Unsecured Loans Exemplify Greater Lending Power of Singapore Banks

The largeness of the amount of unsecured loans that Zenrock was able to obtain from Singapore banks, are examples of the greater lending authority conferred to banking institutions.

The billions and millions of unsecured loans granted as commercial loans by banks, clearly dwarf the size of unsecured loans that a licensed money lender in Singapore is allowed to extend to a single borrower; $500 to $3,000 at the least if a borrower earns less than $10,000. At the most, licensed money lenders in Singapore can approve a loan of up to six times the value of a borrower’s monthly income if the borrowing individual enjoys a monthly salary of $20,000 or higher.

Just like banks, licensed money lenders in Singapore must make sure that their borrowers fully understand the terms and conditions governing the loan granted.