Scandal-hit oil trader GP Global, which is currently undergoing restructuring, is seeking court intervention to stop creditors in Singapore “stealing a march” on banks that are owed millions of dollars, GTR can reveal.

Court documents filed by GP Apac – a Singapore subsidiary of UAE-based oil giant GP Global Group – describe how the company ran into financial difficulties during 2020, prompted by pandemic-related disruption, a drop in demand for oil products, record low oil prices and bank nervousness over commodity finance lending.

Its chief restructuring officer and sole director, Rod Sutton of FTI Consulting, says evidence then emerged of “irregular commodity trades and/or fictitious trades where there was no actual transfer of any underlying cargo”.

“This left the group with significant bad debt as the trade receivables due from these ‘trades’ are unlikely to be recoverable,” he says in an affidavit filed in Singapore’s High Court in February and seen by GTR.

According to that document, GP Apac owes more than US$460mn to 20 unsecured lenders, the three largest of which are UBS, Credit Suisse and UniCredit. The company had obtained more than US$1.2bn in trade finance facilities, co-borrowing with other group entities.

Once restructuring has taken place and assets are sold, the document estimates banks could recover between 34% and 47% of losses, depending on the discounts applied to fair market values. If the company enters liquidation and suffers a forced asset sale, the figure is just 9%.

The company is currently applying to the court for a six-month standstill, which would prevent it going into liquidation.

The application already has the support in principle of several larger creditors, including Credit Suisse, UBS, Rabobank and Amsterdam Trade Bank, and a hearing has been scheduled for March 2 according to a source close to the matter.

However, efforts to restructure have run into problems with smaller creditors in Singapore. In mid-January, Equatorial Marine Fuel Management Services – a bunkering firm based in the city state – filed an application to seize and sell the company’s Singapore office premises.

Sutton points out in the affidavit that Equatorial is only owed around US$670,000, whereas the office is valued at more than eight times that amount.

GP Apac fears a sale would “scuttle an S$8.5mn liquidity injection” that could support payment to creditors, and would likely be seen as a distressed sale and so attract bids below market value. If the sale fell through, it could also expose the company to damages from the prospective buyer.

Equatorial “should not be allowed to steal a march on the rest of the creditors”, the affidavit says.

In response to those concerns, GP Apac submitted a court application on February 19 seeking to block the seizure and allow the property to be sold as part of restructuring efforts instead.

That would result in funds from the sale being placed into escrow for the benefit of all creditors, a source explains. “That’s the fair thing to do, and we believe the court will rule in our favour,” they argue.

“GP Apac’s continued operation and survival as a going concern is instrumental to the success of the group’s restructuring plan,” says the latest application, also seen by GTR.

“This is so because GP Apac owns some of the group’s key assets that are necessary to generate the required liquidity and cash flow for the success of the group’s restructuring process.”

As well as the property in Singapore, the application cites Indian entities held by the GP Global Group as assets believed to hold value.

Equatorial did not respond when contacted by GTR.

There have been other complications around the process in Singapore. Four days after Equatorial applied to seize the property, DBS Bank said it would terminate a US$6.4mn facility it had made available to GP Apac.

US-headquartered energy giant Chevron has also threatened to apply for a winding-up order against the company.

But action by minority creditors “compromises the group’s overall restructuring plan and risks these creditors preferentially recovering payment over creditors in the same class”, Sutton’s affidavit argues.

Investigations into the company’s history of “questionable transactions” are ongoing, but feed into wider concerns over the commodity finance market.

UAE-based trader Phoenix Commodities went into liquidation last year with outstanding debts of over US$400mn, with Standard Chartered and HSBC among its creditors, while a string of defaults in Singapore had a knock-on reaction across the banking sector.

As GP Apac court documents note, trade finance banks became “extremely cautious in lending, given the well-publicised financial troubles and alleged fraud faced by prominent firms such as Agritrade International, Hin Leong Trading and ZenRock Commodities Trading” during 2020.

Several lenders have since withdrawn, scaled back or consolidated their trade and commodity finance activities, notably Dutch trio ABN Amro, ING Bank and Rabobank.