Singapore firm nears a deal with creditors
2005-11-24
    MONDAY, NOVEMBER 21, 2005
    SINGAPORE Even as China's authorities raced to cope with an emerging scandal over trading in copper, the $550 million oil-trading scandal last year that culminated in the collapse of state-owned jet fuel importer China Aviation Oil (Singapore) appeared to be inching closer to resolution.
    China Aviation Oil said Monday that it expected to announce a deal next week to sell a minority stake to an unnamed investor to raise funds as part of an agreement with creditors on how to repay its debts.
    "We expect the terms to be finalized soon and hope to make an announcement on the matter next week," said Gerald Woon, a spokesman for China Aviation in Singapore. He declined to comment on reports from Beijing and Singapore that BP and Dutch oil trader Vitol had joined Temasek Holdings, the Singapore government's investment arm, in talks to buy a stake.
    News agencies, citing unnamed sources, said Monday that BP had agreed to pay roughly $45 million for a 23 percent stake in China Aviation as part of a plan to gain a greater foothold in China's fast-growing market for fuel.
    "We've got no comment to make on any questions relating to this speculative story related to BP and China Aviation," said Jamie Jardine, spokesman for BP's operations in Asia, reached by telephone in London. Officials from Vitol's office in Singapore did not respond to a request for comment.
    China Aviation Oil, which had a monopoly on importing jet fuel into China, collapsed last November after using derivatives to bet against the price of oil. The company's former chief executive, Chen Jiulin, is expected to stand trial in Singapore next year on 15 criminal charges. Also facing criminal charges are the company's former finance chief, Peter Lim, and three of its China-based directors.
    In August, regulators in Singapore fined China Aviation's parent, state-owned China Aviation Oil Holding, 8 million Singapore dollars, or $4.7 million, as part of a settlement that shields the company from criminal prosecution here.
    China is trying to stem losses from another incorrect bet, this time on the price of copper.
    The country's State Reserves Bureau, which is charged with managing China's stockpiles of metals, has been selling copper to help stem a rise in the price of the metal to record levels after a trader at another government firm lost more than $200 million betting that copper prices would fall.
    The equity sale by China Aviation is part of a restructuring deal reached with creditors in June. According to the terms of that agreement, parent China Aviation Holding agreed to sell a minority stake to a new investor and use the proceeds as part of a $130 million lump-sum payment to creditors. The company has since been in talks with Temasek, but last week reports began to emerge that it had also entered into discussions with BP.
    A Temasek spokeswoman, Rachel Lin, said those talks were still under way. She declined to comment on the report that a deal had been reached or that Temasek would take a stake jointly with either BP or Vitol.
    BP has already made investments worth $3 billion in China and counts itself as one of the country's largest investors. It owns a stake in China's first liquefied natural gas terminal, in Guangdong Province, which will be supplied by fields in Australia in which BP has a stake. BP-operated gas fields in Indonesia, moreover, have been selected to supply a second LNG terminal in Fujian Province.
 
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