Back in the second half of 2015, shortly after Saudi Arabia unleashed the (first) OPEC disintegration by flooding the market with oil in hopes of killing US shale (so deja vu... only back then it took it about two years for it to realize its low production costs are no match for the US junk bond market) and when China's economy briefly collapsed forcing Beijing to devalue its currency and trigger a violent plunge in commodity prices around the globe (so deja vu... only back then the Shanghai Accord of Jan 2016 restored order to the world), traders were looking for ways to short the chaos and one of the favorite trades was to bet on the collapse of commodity merchants such as Glencore, Vitol, Trafigura and Mercuria, whose fates were closely interwoven with the prices of the commodities they traded. As a result, Glencore's stock price plunged and its CDS soared amid fears the commodity crash cascade would lead to a default wave among anyone with commodity exposure.

Fast forward 5 years when the biggest commodity crash in generations, one which has sent the price of oil tumbling to levels not seen since George H.W. Bush was invading Middle Eastern nations, and... nothing: while the Glencores of the world have indeed dropped, their valuations are nowhere near the late 2015 lows even as the prices of several key commodities have rarely been lower.

That might be changing, however, because the longer global economic activity fails to rebound and the longer commodity prices remain at their current depressed levels, the more the global liquidity crisis will transform into a solvency crisis, hitting some of the most prominent commodity traders in the world... such as Singapore's iconic oil trader Hin Leong Trading, which according to Bloomberg has appointed advisers to help in talks with banks as some of them freeze credit lines to the firm.

Yesterday, Bloomberg first reported that at least two lenders won’t issue new letters of credit to Hin Leong amid concerns over its ability to repay debt; as a result, the firm appointed advisers this week to help negotiate with banks for more time to resolve its finances. Letters of credit are a critical financial backstop for commodity traders, used as way of financing critical short-term trade. A bank issues the so-called L/C on behalf of the buyer as a guarantee of payment to the seller. Once the goods have exchanged hands, the buyer repays the lender.

Hin Leong suddenly finds itself without providers of L/Cs - for reasons still not exactly known - without which it is effectively paralyzed as it needs to front cash for any transactions, something no modern commodity merchant can afford to do.

While it's note exactly Trafigura, the privately-held company founded by legendary self-made Chinese tycoon Lim Oon Kuin could be the latest casualty of the crash in oil prices. Meanwhile, speculation over Hin Leong’s potentiall collapse has ricocheted around the tight-knit oil trading community in Singapore, one of the world’s most important oil markets and the biggest ship fueling hub. Think of Hin Leong as Singapore's oil "Lehman", because as Bloomberg notes, before crude’s spectacular crash, it would have been almost unthinkable that such a major player in the market could be in such a position.

Now, not so much.

Billionaire Lim Oon Kuin, 76, founded Hin Leong Trading in 1963 at age 20 with a single truck delivering diesel to fishermen and small rural power producers. Since then OK Lim, as the founder is known, has grown the company into one of Asia’s largest suppliers of ship fuel, or bunkers, and one of Singapore largest independent oil traders. OK Lim built the company from a one-man-one-truck oil dealer to a regional powerhouse with assets including 130 vessels, with businesses across oil trading, terminal and storage, bunker supply and lubricants manufacturing, according to its website.

Products traded by Hin Leong Group include: crude oil, feedstock, middle distillates, petrochemicals, biofuel, mogas, naphtha, fuel oil, LPG, asphalt, base oil and lubricants. Company’s trading revenue surpassed USD 14 billion in 2012. Larges shipments of oil are sourced through well-established network of partners including oil majors and national oil companies generating significant economies in freight and resulting in cost savings for our buyers. Integrated oil trading services comprising of trading, shipping, blending, storage and an extensive fleet of oil tankers add value and complement our trading activities. This integrated approach enhances our trading flexibility and efficiency in responding to a dynamic oil trading market.

The group's shipping arm, Ocean Tankers, owns a fleet of more than 130 tankers and is run by son Evan. Lim also co-owns oil storage unit Universal Terminal with PetroChina. The company’s bunkering arm, Ocean Bunkering Services (Pte.) Ltd., was ranked the third-largest shipping fuel supplier in Singapore last year, according to the city-state’s Maritime and Port Authority.

Hin Leong’s situation arises amid a torrid period for the Asian commodity trading industry, including multi-million dollar losses by some high profile Chinese and Japanese traders, and the collapse of Noble Group, one of the biggest names in the industry.

According to Bloomberg, Hin Leong’s financial accounts couldn’t be found on the website of Singapore’s accounting regulator; its (slightly outdated) website said that the company's revenue surpassed $14 billion... in 2012.

In a rare interview in 2018, OK Lim’s son said Ocean Bunkering Services aimed to raise its monthly bunker fuel sales to as much as 1 million tons from 650,000 tons in January that year. Singapore’s monthly bunkering sales averaged around 4 million tons in the past five years.

It is unclear what will happen to the Singapore commodity trading giant if it is unable to find banks that will backstop its operations. Should the firm become insolvent, the downstream cascade for companies in the Pacific Rim could be devastating.