The company that supplies most of the jet fuel in China - forced to seek court protection from creditors after US$550 million in trading losses - is trying to persuade lenders to back purchases so it can keep the country's airlines flying.
The parent firm of troubled China Aviation Oil (Singapore) Corp sent a team to reorganize the business and maintain shipments to China, where it supplies 100 airports, including hubs in Shanghai and Tianjin, said spokesman Gerald Woon.
China Aviation ran up losses as New York oil futures surged to a record US$55.67 a barrel on October 25, partly because of surging demand from China, the world's second-biggest oil user.
China Aviation joined a wave of speculation in commodities futures in the past year as China's demand for metals and fuel caused prices to soar.
Singapore Exchange Ltd, which runs the city-state's securities and derivatives market, said an investigation into trading losses at China Aviation may take weeks to complete.
The announcement was the second in two days by the exchange, which said it was "disappointed" by the losses at China Aviation. A group representing retail investors in the city-state was "shocked" by the losses, which it said raised concern about corporate governance at Chinese companies.
The trading loss is close to the company's market value of US$570 million when its Singapore shares were suspended on Monday. The stock has fallen 49 percent since touching an all-time high on March 23.
"The company essentially has nothing," said Don Gimbel, senior managing director of Carret & Co in New York. "All it has is its airport holdings. If it sells that to pay off the debt, the company's got nothing else. It's a wash."
China Aviation's jet fuel suppliers include South Korean refiner SK Corp and Japanese trading company Itochu Corp.
"I think the parent company can pay for fuel cargoes," said oil consultant Ong Eng Tong. "As long as the parent company can pay for it, or open letters of credit, there shouldn't be any problem."
China Aviation suspended Chief Executive Chen Jiulin and is seeking a rescue by majority shareholder China Aviation Oil Holding Co and Singapore state investment agency Temasek Holdings Pte, China Aviation said in a statement on Tuesday. The Chinese state-run parent and Temasek may invest US$50 million each, the statement said.
The parent is owned by China's State-owned Assets Supervision and Administration Commission, a unit of the State Council, or Cabinet.
Ji Xiaonan, a spokesman for the commission, yesterday said she won't comment on "individual corporate behavior."