Bank offers creditors cash

SINGAPORE - Deutsche Bank is offering to buy some of China Aviation Oil (Singapore) Corp's US$530 million ($719 million) debt from creditors for 40 per cent of the amount owed, according to an email the bank sent to a creditor.

The bank is offering an immediate cash payment, according to the email on March 3. Deutsche Bank's Hong Kong-based spokesman Mike West would not comment.

In January, China Aviation Oil offered creditors 41.5USc for every dollar owed.

China's dominant jet fuel importer faces at least three lawsuits after racking up US$550 million in losses trading derivatives.

Creditors including SK Corp and Standard Bank London rejected China Aviation Oil's offer, saying the amount was too low and the payment period too long.

"What would you rather have, the money today or over time?" said Michael Preiss, senior investment adviser at Coutts Bank (Schweiz) in Singapore, which is not owed money by China Aviation Oil. "Deutsche Bank is probably taking the view that their assets are worth more. Somewhere in their books, there might be some hidden gems."

China Aviation Oil's offer is worth 35USc at most in today's money, because more than half will be paid over eight years, Martin Botha, director for commodities activities at Standard Bank London said last month. Standard Bank is owed US$34 million.

"There'll be some creditors going all out to get back 100 per cent," said James Tan, director of Evolvere, a Singapore-based corporate governance consultant. "Others will see how much they can get out now without having to worry about it for the next eight years."

In January China Aviation Oil urged creditors to look very closely at the scheme of arrangement, which a spokesman described as "a fair deal for creditors".

Deutsche Bank had offered to pay creditors 39USc late last month, according to creditors, who asked not to be named.

Merrill Lynch has also approached some creditors, offering to pay about 32USc in the dollar, said the creditors.

Merrill Lynch's spokesman in Asia, R.G. Rosso, declined to comment.

- BLOOMBERG