China's government on Friday gave its official reaction to the US$550m derivatives trading loss of state-controlled China Aviation Oil, accusing the Singapore-listed company of irregular speculation and telling other state ventures to learn from the scandal.
However, the State-owned Assets Supervision and Administration Commission (Sasac) avoided any review of the actions of CAO's parent company, which it owns, saying only that the group was ?sparing no effort to deal with the matter?.
The Beijing-based parent company's role is central because of allegations that it knew about CAO's troubles but did not reveal them when it sold a 15 per cent stake in the unit in October.
Separately, Singapore's high court on Friday granted CAO protection from its creditors for six more weeks to prepare its restructuring plan. Lawyers from CAO, parent CAO Holding and creditors spent more than an hour in the closed-door hearing. CAO must call a creditors' meeting on the plan within six months.
Two creditors South Korea's SK Energy Asia and Switzerland-based commodities trader Glencore International objected to the extension without disclosing their reasons. Edmund Kronenburg, a lawyer at Tan Peng Chin representing SK Energy Asia, said his client would have preferred CAO to have presented its restructuring plan earlier. SK Energy Asia is believed to have provided about a third of CAO's jet fuel and is waiting for payment on shipments worth about US$14m.
Sasac appeared ready to let Singapore's authorities lead efforts to handle the aftermath of CAO's trading losses, saying they should be dealt with according to market principles and that it would seek to establish legal responsibility only ?after the matter has been settled?.
Chinese state media quoted Hai Liancheng, CAO Holding's deputy general manager and corporate Communist party chief, as drawing a clear line between parent and subsidiary.
CAO Holding was not responsible for the listed company's losses but would take ?a responsible attitude toward shareholders and creditors?, Mr Hai said.
However, it may prove difficult to keep the parent out of the scandal. Chen Jiulin, former CAO chief executive, alleged in an affidavit last week that CAO Holding's 15 per cent stake sale was made to help the Singapore unit satisfy margin calls, although the company claimed at the time that it was for investment.
Mr Hao, the holding company's party chief, said allowing CAO to fail would damage the overseas image of other Chinese companies and have a negative impact that ?must not be underestimated?.
