A High Court hearing for OCBC Bank's application to bring the Lim family-run Xihe Holdings and four of its vessel-owning units under judicial management has been adjourned to Aug 13.
Following a hearing in chambers yesterday, the Xihe Group of companies, which owns nearly 140 vessels, said "it and its 12 lenders have adjourned court proceedings to work together towards a consensual restructuring".
On July 20, creditor OCBC applied to the High Court for Mr Seshadri Rajagopalan and Mr Paresh Jotangia of Grant Thornton Singapore to be appointed as interim judicial managers (IJM) for Xihe and four of its subsidiaries: Da Xin Tankers, Hua Guang Shipping, Nan King Maritime and Hua Xin Shipping.
Among the reasons cited, OCBC said it "strongly distrusts (their) current management" after US$208.1 million (S$286 million) was transferred by the Xihe group to troubled oil trader Hin Leong "for no valid commercial purpose", according to court documents seen by The Straits Times.
The Lim family, which owns and manages the Xihe group, has "admitted to and/or been found to have fabricated fictitious gains and forged documents on a massive scale, concealed massive losses, misused secured inventory and misled banks into extending financing to Hin Leong, causing (the) billion-dollar insolvencies of Hin Leong and Ocean Tankers", OCBC added.
Hin Leong and its shipping arm Ocean Tankers initially sought a six-month moratorium on debts of more than US$3.6 billion to 23 banks. The oil trader's founder Lim Oon Kuin admitted he had directed the firm to hide about US$800 million in futures trading losses.
OCBC noted that the Lims further paid themselves dividends of US$30 million in 2017 and US$60 million in 2018 from Hin Leong when there were no profits to support such dividends, and withdrew US$19 million from Ocean Tankers shortly before filing for the debt moratorium.
The serious irregularities extend to the affairs of Xihe and its four units, OCBC said.
It noted that "bareboat charters of OCBC-financed vessels were terminated without OCBC's consent, and the Xihe units have persistently failed to... collect payments from Ocean Tankers for months or years, to the prejudice of creditors of the Xihe group, and in breach of contractual obligations owed to OCBC".
"Especially in the light of the interlinked businesses, common ownership and leadership of the debtor companies, Hin Leong and Ocean Tankers, independent judicial managers need to be appointed urgently over the debtor companies to investigate the serious irregularities and prevent further prejudice to creditors," OCBC said.
