OW Bunker files for bankruptcy

January 2015 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

OW Bunker A/S, the marine fuel supplier, filed for bankruptcy at the probate court in Aalborg on 7 November. According to the firm’s board of directors and management, it had not been possible to find a sustainable solution to the firm’s difficulties. As a consequence, shortly thereafter OW Bunker & Trading A/S, OW Supply & Trading A/S, and OW Cargo Denmark A/S also filed for bankruptcy. The four companies are now being administered by two trustees: Pernille Bigaard of Danish firm Plesner and John Sommer Schmidt of Danish firm Gorrissen Federspiel.

“Since the credit facility was closed down on Wednesday, the underlying business has eroded significantly,” said Niels Henrik Jensen, chairman of the board of directors at OW Bunker. “The banks hold mortgage over all receivables and consequently, without the provision of new, significant credit facilities in the immediate future, it is not possible to save the remaining business. It is now clear that such facilities will not be made available. Nor is a sale as going concern a realistic option. We are therefore left with no option but to file for bankruptcy. On behalf of the entire board of directors and management, we deeply regret this outcome and the consequences affecting the company, its employees, shareholders and business partners.”

OW Bunker, founded in 1980 and based in Noerresundby, Denmark, also has offices in Australia, Belgium, Brazil, Canary Islands, Chile, China, Faroe Islands, Germany, Greece, Hong Kong, North Atlantic, India, Korea, Lithuania, the Netherlands, Panama, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Arab Emirates, the United Kingdom, the United States, Uruguay, and West Africa. O.W. Bunker & Trading A/S operates as a subsidiary of Wrist Group A/S. Concurrent with the bankruptcy proceedings, an OW Bunker internal investigation uncovered serious irregularities at the firm’s Singapore-based subsidiary, Dynamic Oil Trading (DOT), and the decision was taken to report two key employees to the police pursuant to section 299 of the Danish penal code. Both employees were relieved of their duties with immediate effect. OW Bunker has reported that the alleged fraud at its Singapore unit cost the firm $125m while a separate risk management failure resulted in a $150m loss. At the time of writing, neither employee has been identified, nor do they admit to any wrongdoing.

“The Danish government is still trying to figure out what happened with OW Bunker before deciding whether to act,” said business minister Henrik Sass Larsen. “It would be premature to call for legislative changes based on what we know so far.” Opposition parties sought reassurance. “Steps need to be taken to ensure investors can again trust the prospectuses they receive,” said Hans Kristian Skibby, a spokesman for the Danish People’s Party.

According to Soeren Johansen, a partner at Altor Equity Partners and deputy chairman of OW Bunker, the fraud allegations were what finally exhausted the patience of banks. “While its (OW Bunker) banks would have been willing to continue talks had the company’s problems been limited to risk management failures, the revelations of fraud were too much,” he said. “A solution was very likely after the unexpected risk management loss, but it wasn’t until the possible fraud was known that the banks shut down credit to the company.”

Mr Johansen went on to say that the company’s stakeholders will be “best served by having things thoroughly investigated”. However, Jesper Langmack, chief investment officer at PFA Pension, which invested 100 million kroner ($17m) in OW Bunker A/S, feels that the firm’s risk losses should be a bigger concern than the allegations of fraud. “We kept asking them if the hedging was a profit centre or just clean hedging,” said Mr Langmack. “It then turns out they’ve been taking up massive market positions. When we asked before the IPO, we were left with the impression all they did was more or less clean hedging and now it turns out they were gambling.” OW Bunker A/S’s bankruptcy means that the firm proceeded from being valued at $1bn after its initial public offering in March to being a bankrupt entity in just eight months – a turnaround which has sent shockwaves through the investor community in Denmark.

Fraser Tennant