China Aviation Oil Corp (Singapore), which lost US$550 million in speculative trading last year, has averted liquidation after the majority of creditors accepted its debt-restructuring plan yesterday, the same day five of its officials were arrested by Singapore police.

"It is great news for CAO as it can soon resume business and move on," a Singapore-based oil trader told China Daily, who said the arrests remind independent directors that "they are supposed to shoulder their responsibilities, rather than work as a rubber stamp."

The Singapore-listed company won the support of creditors hours after its suspended CEO Chen Jiulin and four other company officials were arrested.

At a creditors' meeting yesterday, 89 out of 92 accepted the company's debt-payment proposal, CAO's spokesperson Gerald Woon told reporters in Singapore.

The agreement concludes seven months of negotiations since CAO revealed huge losses. It would have gone bankrupt if it failed to win votes from half of its 126 creditors for its debt-payment plan.

CAO offered an improved debt-restructuring plan last month after most creditors rejected the original one. The new plan offered creditors a debt payment of US$275 million, increasing the debt payment rate from 41.5 to 54 percent.

The company, which used to be the dominant Chinese jet-fuel importer, owes US$510 million. It sought court protection after losing US$560 million last year in speculative oil trading, the largest financial scandal in Singapore since the collapse of Barings Bank in 1995.

In a statement yesterday, CAO said Chen, 43, may be prosecuted for 15 offences.

Three non-executive directors, Jia Changbin, Li Yongji and Gu Yanfei will also be charged for failing to disclose to the board and Singapore Exchange Limited (SGX) the losses during the options trading.

Jia, president of the state-owned China Aviation Holding Company, parent company of CAO, is also charged with insider trading with respect to the placement of 15 percent of CAO shares.

Peter Lim Tiong Sun, head of CAO's finance division, has also been notified that he may be prosecuted, the statement said.

The five officials will appear in court today to answer the charges.

In another statement yesterday, CAO said creditor Satya Capital Ltd., a Hong Kong-based investment company, agreed to settle a legal dispute with CAO and its parent.

Under the settlement, Satya accepted a claim of US$28 million and joined other creditors in the debt-payment plan, the company said.

(China Daily June 9, 2005)