Troubled commodities trader Rhodium Resources lost insurance cover totalling more than US$580mn last year, leaving it unable to pay creditors and facing the threat of insolvency, court documents reveal.
Singapore-headquartered Rhodium fell into serious financial difficulties in August 2020, according to documents submitted to the city-state’s High Court in December that year by its chief executive, Cheam Hing Lee.
In those documents, seen by GTR, Cheam says Rhodium – which has since been renamed Antanium Resources – ran into cashflow problems in early 2020 as a result of the Covid-19 pandemic.
Between August and December that year it was served with demands for payment from several creditors, including AlmaStone Opportunities, Kimura Capital and BNP Paribas, eventually leading the trader to apply for court protection from further legal action so its debts could be restructured.
The documents say that as of September last year, secured creditors were owed just under US$182mn, while the 20 largest unsecured creditors were owed more than US$442mn.
Typically, Rhodium would purchase goods from a supplier to be sold onto another buyer on extended payment terms, the documents explain. The resulting receivables would then be insured and sold to outside funders.
But according to Cheam, that model ran into problems when several providers told Rhodium they would no longer provide credit insurance cover for those transactions.
Loss of cover
In August 2020, one underwriter withdrew credit insurance limits worth around US$413mn, Cheam says. Another underwriter then withdrew part of its coverage, totalling another US$103mn, while a third declined to renew cover worth around US$68mn. Cheam does not say why those decisions were taken.
“The withdrawal and termination of insurance limits means that the company will have to either find new underwriters, which will be difficult in the current economic climate, or else attempt to trade with buyers and funders who do not require insurance, which will also be difficult,” he says.
In other cases, Rhodium’s buyers requested further extensions on their payment terms, but its underwriters were unwilling to extend cover for the associated receivables, or would do so only for a maximum of 15 days.
“If credit insurance is not available, then competitive funding is very difficult to obtain, and the company’s ability to provide supply chain financing is severely compromised,” Cheam says. “This adversely affects the ability of the company’s customers to buy from it.”
The court documents show that Rhodium’s insurers included Chubb, QBE and Canopius. The premiums on some of those policies totalled several million dollars.
Rhodium also had cover from Australian underwriter Bond & Credit Company (BCC), which has made headlines this year following its role in the collapse of supply chain finance provider Greensill.
Separately, BCC has faced a lawsuit this year from an Australian agriculture finance provider for refusing to honour a claim for A$7.3mn owed by collapsed Dubai-based commodities trader Phoenix Commodities.
As of December 2020, Rhodium had already started pursuing claims on unpaid debts prior to the loss of cover, submitting claims to insurers totalling around US$21mn.
However, Cheam says the claims process is “a lengthy and complicated one”. He gives the example of an insurance claim for an unpaid debt from Agritrade – a commodities trader that collapsed in early 2020, and has since faced accusations of widespread and systematic fraud.
Credit insurers initially gave Rhodium an in-principle confirmation of the claim, but later withdrew that approval on the grounds that it “requires further information due to the circumstances surrounding the Agritrade default”, he says.
In the second half of 2020, Rhodium received seven letters demanding payment, including a statutory demand from Bank Mandiri, as well as a notice of default from one lender, AlmaStone.
It was also subject to legal proceedings brought by Maybank in September that year, alleging that it should have paid the Malaysian lender US$3.2mn following a purchase from Intra Asia Trading. Rhodium says it is defending those claims on the basis it had already made the payment to Intra Asia.
The court documents show Rhodium had nine secured creditors as of December 2020: Kimura, Sealoud Asia, Quant Impex, White Oak, AlmaStone, Apies Ventures, United Industrial Group Asia, Bank Mandiri and BNP Paribas.
Quant Impex and White Oak – which has acquired Greensill-related assets and is involved in refinancing efforts by GFG Alliance, a network of companies linked to metals tycoon Sanjeev Gupta – are also among a much larger group of unsecured creditors.
Cheam says that as of December 2020, 10 creditors had expressed their support for Rhodium’s moratorium application, including three of the nine secured creditors.
The company argued that fulfilling the payment demands would “choke up the company’s ability to obtain financing and supply its customers… and will ultimately lead inevitably to the company’s liquidation”.
Some of those 10 companies now appear to be in financial difficulty themselves, however.
Sealoud Asia and Seashore Resources – which were owed around US$33mn and US$18mn respectively – are in liquidation following compulsory winding up orders, according to Singapore’s corporate registry.
Another company, Apies Ventures, told Rhodium: “As you know Apies is in the same situation, we support your application and hope you will do the same in return.” Apies Ventures did not respond when contacted by GTR.
Quant Impex is still listed in Singapore’s corporate registry as a live company, but its website is no longer active. The most recent available record of activity dates back to August 2020. The company did not respond when contacted.
Supernova Enterprises and United Industrial Group (Asia) also no longer have active websites, though are listed as live companies in Singapore and Hong Kong respectively. Neither company responded when contacted.
Hong Kong-headquartered Novita Trading Limited, tells GTR it is still an active company.
The two others are AAFC No. 3 Corporation and MHC No. 1 Corporation, which are based in the Marshall Islands and Cayman Islands respectively.
An unnamed “major creditor” also gave in-principle support to the application, Cheam adds.
Of the nine named creditors in support of Rhodium’s application, seven appear as participants on Triterras’ blockchain-based trade finance platform Kratos, according to GTR examinations of publicly available data.
That includes the two insolvent companies, Sealoud Asia and Seashore Resources. Blockchain data seen by GTR shows Sealoud was the most active participant on the Kratos platform in 2020, prior to its insolvency, though Triterras has previously said such claims are based on “incomplete” information.
Triterras did not respond when asked by GTR whether the seven companies in support of Rhodium’s moratorium application are still active on the platform. Six of the companies did not respond when contacted, while Novita Trading Limited did not state whether or not it remains an active participant.
Triterras’ founder and chief executive, Srinivas Koneru, is also founder and director of Rhodium Resources, and its parent company Antanium Holdings, though Triterras remains a separate legal entity.
Following Kratos’ launch, Triterras said it would initially refer Rhodium’s existing customer base to the platform before gradually reducing that dependence as new participants joined.
However, it has since faced legal challenges over that claim, as well as accusations from short sellers that a greater proportion of participants had ties to Rhodium or fellow founder company Longview Resources than had previously been disclosed.
As of press time, US-listed Triterras faces the prospect of being de-listed by Nasdaq after repeatedly missing deadlines for filing its audited annual accounts.
On December 1, it asked for a third deadline extension and vowed to publish its results by December 8. The company has not yet said whether that application was successful, and as of December 15 has yet to file accounts.
A spokesperson for Nasdaq tells GTR the exchange cannot comment on regulatory matters about specific companies.
Rhodium did not respond when contacted by GTR, and is not accused of any wrongdoing.