The former Chairman and Executive Director of Hong Kong-listed Brightoil Petroleum Holdings, Dr Sit Kwong Lam, undertook personal guarantees worth a total of approximately US $1.4 billion, according to a company statement.
Dr Sit left the company after being declared bankrupt by the High Court of Hong Kong.
He earlier undertook various borrowing agreements and a finance lease agreement with various institutional borrowers.
“The aggregated borrowing amounted to approximately USD1,362 million,” stated Brightoil.
“Apart from these aforesaid borrowing transactions, there are outstanding amounts, totally USD76.15 million due to three trading partners, which are also guaranteed by Dr Sit.”
In relation to the personal guarantees of Dr Sit, Brightoil declared:
The personal guarantees do not contain any specific provisions relating to the bankruptcy of the guarantor and it is not possible for the Company to predict what steps these trade creditors will take as a result of Dr. Sit's bankruptcy.
As of the date of this announcement, the Company is not aware of nor have there been any legal proceedings brought against the Company by these creditors consequent on Dr. Sit’s bankruptcy.
The above statement was found within the company’s quarterly update on its resumption progress and business operations issued on Monday (6 May).
Resumption of trading
Brightoil noted the Hong Kong Stock Exchange (HKSE) requiring the company to disclose findings of an internal forensic investigation, its financial and operational position, while publishing all outstanding financial results, amongst other requests, before being allowed to resume trading on the HKSE.
As such, the company has decided to proceed with computer forensics, a process recommended by its Independent Adviser, in order to meet the specific requirements of the Auditor.
However, Brightoil has found the Independent Adviser’s outstanding fees and estimated costs for e-discovery “excessive” and will proceed to negotiate for a discount on outstanding fees while introducing a ceiling of the costs for e-discovery before proceeding with computer forensics.
“As at the date of this announcement, the Review has not been completed,” it stated.
“The management will negotiate with the Independent Advisor to minimize the engagement costs such that they will come within the budgeted fee level as discussed and agreed in the Board meeting held on 26 April 2019 while ensuring that the work to be done by the Independent Auditor will provide sufficient assurance to the Auditor.”
The suspension of trading at Brightoil has caused financing banks to tighten credit for the International Trading and Bunkering Unit (ITB) Business “drastically reducing business volume”, it says.
Operations of 5 VLCCs, 6 bunker barges and 4 Aframax tankers of the group have been totally suspended due to arrests by creditors since the end of 2018.
Sale of the company’s Zhoushan Oil Storage and Terminal Facilities is still under negotiation with several parties.
“The negotiation process has been prolonged due to valuation and terms of payments,” updates Brightoil.
“While the Company is negotiating with potential buys and searching for further potential buyers, completion of the Zhoushan Oil Storage and Terminal Facilities has been deferred until new funding becomes available.”
Potential debt reorganisation
To date, Brightoil has declared aggregate debts of approximately US$1.85 billion with claims of approximately US$391 million made by some creditors.
It has started discussions with key financiers for external financing who have “responded positively” by forming a committee to work with the group.
“Presently, due diligence is being carried out in relation to the extent of existing financial obligations of the Group that will require reorganization, and is expected to complete due diligence in the next three months,” it updates.
A chronologically organised list of articles concerning Brightoil’s potential debt reorganization is below:
Related: Official: Dr Sit Kwong Lam leaves Brightoil Petroleum Holdings
Related: Hong Kong High Court issues bankruptcy order against Brightoil Chairman
Related: Brightoil aggregate debt has reached approximately $1.9 billion, it updates
Related: Brightoil creditor claims amount to US $250 million, potential debt reorganisation
Related: Brightoil to defend against winding up petition at Hong Kong court
Related: Singapore: Brightoil to apply for six-month moratorium order at High Court
Related: Brightoil oilfield project secures USD $700 million CNOOC funding
Related: Brightoil: Plans to sell Zhoushan oil storage terminal, 15 vessels
Related: Shell to offload crude oil cargo from arrested “Brightoil Lion” tanker
Related: Brightoil VLCC and Aframax tanker arrested at Singapore port
Related: Singapore: Players to get fuel oil cargoes back from Brightoil bunker tankers
Related: Singapore: Petrolimex v Brightoil case progresses to Pre Trial Conference
Related: Singapore: Brightoil bunker creditor list growing with new firms
Related: Singapore: Petrolimex owed over USD $30 million by Brightoil
Related: Brightoil signals return to the shipping sector, starts reorganisation of debt
Related: Singapore: Brightoil bunker tanker fleet placed under Sheriff’s arrest
Related: Singapore: Toyota Tsusho Corporation seeking $21 million from Brightoil
Related: Qatar National Bank seeks USD $21.59 million debt from Brightoil
Photo credit: Brightoil Petroleum (Holdings) Limited
Published: 8 May, 2019
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