China Aviation Oil (CAO) Singapore Corp. Ltd. CEO arrested
in Singapore trading scandal.
China Aviation Oil (CAO) Singapore Corp. Ltd Corporate Update as of 8
December 2004 Dec 08, 2004 from their
website
1) Cessation of All Oil Derivatives Trading Activities
Since its announcement on 30 November 2004, the Company has ceased all oil
derivative trading activities. There are no open positions in respect of
futures and options oil trading activities as at 7th December 2004, except
for back to back oil option trades with three counterparties.
With regard to swap derivative trading activities, as of 7th December 2004,
25 counterparties have unilaterally terminated their trades with the Company
based on their contractual rights. There are 35 counterparties where their
respective trades are still subject to market fluctuations. The Company has
informed all the counterparties for the remaining back to back option trades
and swap derivatives that the Company intends to terminate these trades
immediately. The Company is monitoring the situation very closely to find a
solution to close out these open positions with the respective
counterparties.
2) On-going Discussions with Creditors
Members of the Special Task Force together with the Company’s financial and
legal advisers have been meeting with several of the Company’s creditors to
explain the Company’s financial situation and to garner support for the
Company’s proposed Scheme of Arrangement. The support for the restructuring
exercise by the Company’s parent company, China Aviation Oil Holdings
Company ("CAOHC"), has been reassuring for the creditors. The creditors that
the Company have met so far expressed support to give the Company a
reasonable time to restructure itself. These creditors understand that
winding up or judicial management proceedings would undermine the
restructuring exercise and scuttle the negotiations for support from CAOHC.
3) Co-Signing of Bank Account
The Special Task Force has put in place appropriate control mechanism and a
daily reporting structure. As part of these control mechanisms, the Company
has taken steps to appoint 2 authorised representatives from Deloitte &
Touche Financial Advisory Services Pte Ltd to be co-signatories to the
Company’s bank accounts to control the outflow of cash.
4) Continuation of Core Business
The Special Task Force recognises that it is in the interest of the Company
to carry on the core business of jet fuel procurement. Having considered the
options available, the Company has taken steps to set up a new subsidiary
company wholly owned by the Company to carry on the jet fuel procurement
business.
The new subsidiary will receive financial support from CAOHC by way of
injection of new funding into a trust account to enable the subsidiary to
continue its jet fuel procurement business on an agency basis. The
subsidiary company will receive income from the agency commissions to be
chargeable on the sale of the jet fuel to the Buyers.
The subsidiary company will also receive support from the Company by way of
use of the Company’s equipment, premises and personnel for an agreed fee.
5) Involvement of Independent Directors
The Independent Directors who are also members of the Company’s audit
committee have been monitoring closely and are continuing to monitor closely
developments in the Company. Several measures, forming part of the control
mechanism put in place by the Special Task Force, had been recommended by
them. They have been and are in constant interaction with the Special Task
Force and the Company’s advisers. They have also asked for and are being
given daily briefings by the Special Task Force and the Company’s advisers
on developments in relation to the affairs of the Company (including the
proposed scheme of arrangement).
6) Claim against the Company by Satya Capital Limited
The Company has on 8th December 2004 received a Writ of Summons in which
Satya Capital Limited ("Satya") has commenced a legal suit against the
Company and its Holding Company, China Aviation Oil Holding Company ("CAOHC").
The claim against the Company is for an alleged breach of a Share Purchase
Agreement dated 18 August 2004 between Satya and the Company in which the
Company had agreed to acquire 88 million shares in Singapore Petroleum
Company Ltd ("SPC"). The claim against CAOHC is for alleged conspiracy with
the Company to break the Share Purchase Agreement.
The amount of the claim against the Company and CAOHC is S$47,160,000 and
damages. The amount of S$47,160,000 is allegedly computed on the basis of
the difference between the contract price and the best price that might have
been obtained if the SPC shares had been sold on the open market on 29
November 2004.
The Company is presently seeking legal advice on the matter.
7) Return of Suspended CEO, Mr Chen Jiulin
The Company wishes to inform shareholders that Mr Chen Jiulin has returned
to Singapore today. He has been placed under arrest and is currently
assisting the Commercial Affairs Department in their investigations. The
Company understands that Mr Chen is currently out on bail
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