OW Bunker’s U.S. Units to Consider Bankruptcy Asset Sale

U.S. units of OW Bunker A/S, the bankrupt Danish shipping-fuel supplier that ceased operations this month after reporting $275 million in trading losses and fraud, may sell all their assets to repay creditors.

A sale by the three subsidiaries, which trade and distribute fuel for cargo vessels and cruise ships, may provide the best possible outcome for stakeholders and creditors owed as much as $100 million, the units said in papers filed today in U.S. Bankruptcy Court in Bridgeport, Connecticut.

The U.S. businesses, opened in 2012 as part of OW Bunker’s global expansion, filed Chapter 11 petitions yesterday after the parent company’s report of fraud by two senior executives in Singapore about a week earlier caused credit to freeze up. The parent filed for bankruptcy Nov. 7 in Denmark, owning 15 banks a total of about $750 million, according to court papers.

The U.S. subsidiaries have assets worth as much as $50 million and debt of as much as $100 million, according to estimates in their bankruptcy papers.

“Vendors and creditors have refused credit, accelerated payments for leases and other obligations, issued reclamation demands and ship arrests and required cash upon delivery,” Adrian Tolson, the general manager of OW Bunker North America Inc., said in the filing. The situation is “untenable,” he said.

OW Bunker, which eight months ago had Denmark’s second-biggest IPO since 2010, valuing the company at almost $1 billion, stunned investors after saying two Singapore workers carried out a $125 million fraud. The Noerresundby-based company said it lost another $150 million on bad risk management.
Extra Time

The U.S. units asked the bankruptcy court for extra time to file required lists of assets and debts, citing delays caused by OW Bunker’s sudden collapse and a lack of accounting and invoicing assistance from Denmark.

“This process will take some time to untangle,” Michael Enright, a lawyer for the subsidiaries, said today in a court filing.

About 400 shareholders in OW Bunker met Nov. 11 to discuss how the company, which sells about 7 percent of the fuel used by the world’s shipping fleet, went from boom to bust. Its prospectus for investors painted a picture of a business that was focused on containing risks.

OW Bunker ceased to operate last week after declaring itself bankrupt through the local court in Noerresundby. Trustees were appointed to unwind the company with a view to seeing what’s left to cover creditor claims under Danish law.
29 Countries

The company was founded in 1980 and had operations in 29 countries, according to its website. Two of the bankrupt U.S. units are based in Stamford, Connecticut. The third is based in Houston, according to court filings.

The biggest unsecured creditor of the U.S. units is San Antonio-based NuStar Energy LP (NS:US), which holds a $20.5 million claim, according to bankruptcy papers in the U.S. case. Phillips 66 Co. has a claim of $12.8 million, according to the filings.

Dynamic Oil Trading (Singapore) Pte, the unit of OW Bunker at the center of the fraud allegations, had $2.1 billion in sales from its incorporation in August 2012 to December 2013, according to company records.

Two OW Bunker units have been sued for $19.8 million in Singapore’s High Court as the company’s bankruptcy prompts a tightening of payment terms and undermines confidence in the world’s largest market for the shipping fuel.
Shares Soared

After the IPO, OW Bunker shares soared 21 percent on their first day of trading as investors poured money into a company that touted a “conservative operating philosophy and corporate culture.”

OW Bunker’s shares lost 42 percent since then, before trading was halted on Nov. 5 when banks refused to provide more credit.

The Danish Shareholders Association has said it wants OW Bunker to become a landmark case that prompts the authorities to set new standards and ensure investors in the country never again experience a similar series of failures.

Police in Denmark said they were preparing a probe of OW Bunker after the bankruptcy filing, though charges weren’t a certainty, Mikkel Thastum, a spokesman, said at the time.

The case is In re OW Bunker North America Inc., 14-51720, U.S. Bankruptcy Court, District of Connecticut (Bridgeport).
Source: Bloomberg