The OW Bunker bankruptcy and questions of corporate governance and oversight


The rapid collapse into bankruptcy of OW Bunker just 48 hours after it revealed a $125m fraud at Singapore subsidiary Dynamic Oil Trading, as well as $150m in risk management losses announced at the same time, leaves an awful lot of unanswered questions.

OW Bunker was not a two-bit marine fuel supplier, it had revenues of $17bn in 2013 and claimed a 7\% share of the global marine fuel supply market.

In March this year its IPO on Copenhagen’s NASDAQ exchange valued the company at DKK5.33bn ($900m), making it one of Denmark’s largest IPOs in recent years. In May this year OW Bunker made Forbes list of top 2,000 list of the world’s biggest public companies.

As it stands just seven months on the from the IPO some 20,000 investors will have lost everything they put into the company, based on the statement when it filed for in-court restructuring of its main operating subsidiaries that it “must be assumed that the group’s equity is lost”. Suppliers and sub-contractors will find themselves with large unpaid bills, something which P&I insurers Skuld have warned shipowners about. And more than 600 employees of the group worldwide face a very uncertain future.

Trading is a risky business, and anyone investing in it needs to understand this, but this is also why corporate governance and oversight are so important.

It is worth noting that according to reports in the Danish media the company did not actually uncover the fraud at Dynamic itself, one of its senior executives, flew to Denmark and tearfully confessed to it. How long it would have gone if this had not happened we can only speculate. Two employees have since been reported to the Danish police as OW Bunker filed for bankruptcy.

What fraud was actually committed we do not know, although we do know it was over a six month period, so its open to question whether it was actual embezzlement or the hiding of losses as the market turned against the executives involved. Certainly the recent sharp falls in the oil and bunker price point to the latter as a possibility.

The case bears certain parallels to then Singapore-based, British national, rogue trader Nick Leeson who caused the collapse of Barings Bank in 1995 having run up losses on speculative trades that eventually totaled in the region of $1.4bn. Indeed the BBC is reporting the fraud at Dynamic it could be one of Singapore’s largest financial scandals in the last 10 years, joining what is already a huge scandal in Denmark.

The fraud revelations came on top of the $150m in risk management losses that resulted in the firing of OW Bunker head of risk management and evp Jane Dahl Christensen.

The full extent of the fallout of OW Bunker’s sudden bankruptcy will most likely take years to unravel. However, lessons do need to be learned on corporate governance and oversight for the benefit of all going forward.
Source: Seatrade Global

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