Qualified support from China Aviation parent

THE parent firm of the beleaguered China Aviation Oil Singapore Corp (CAO), China Aviation Oil Holding Co (CAOHC), says it supports restructuring its Singapore subsidiary but urges creditors to have realistic expectations as it could not provide CAO with “unconditional” support.

It also revealed the formation of a new subsidiary to procure aviation fuel while CAO is under investigation by the Singaporean authorities.

CAO lost US$550 million by betting on the future price of oil. The former head of CAO, Chen Jiulin, was arrested last Wednesday [8 December] for questioning on his return from China. He was later released on bail.

CAOHC president Jia Changbin said he regreted the losses suffered by “minority shareholders” due to the actions of CAO. But he said as a “commercial entity”, CAOHC could not pledge “unconditional support” for a restructuring plan currently underway.

He warned support from CAOHC depended on creditors' acceptance of the plan and the quick resolution of legal and regulatory issues in “a timely and progressive manner”.

On a related note a report in the Financial Times indicated CAO has urged its creditors to keep the trading group afloat as a collapse would make it difficult to repay the reported US$400-US$500 million in debt.

The UK business newspaper indicated CAO had apparently informed its creditors selling assets would raise “limited funds”. It is understood CAO’s most valuable assets are a 33% stake in a Shanghai jet fuel supply company and a 5% stake in the Spanish oil transport group CLH.

On a separate note, a new CAO subsidiary has been formed to facilitate the procurement of aviation fuel while criminal investigations are underway, according to a report in the Associated Press.

Speaking to the news agency CAO spokesman Gerald Woon said, “CAOT Pte Ltd has already sent out tender documents to the company’s previous suppliers inviting them to bid for the jet fuel requirements of the ultimate buyers for January and February 2005.”