An investigation is to be carried out into the causes of the bankruptcy of OW Bunker (“OWB”), the largest ship fuel supplier in the world. Investigators from two Danish law firms and Ernst & Young will try to establish the reasons for the failure of OWB less than a year after it was listed at a value of $1 billion. OWB has blamed its failure on hedging losses of $150 million, attributable to the falling price of oil and on a credit line estimated at between $120 and $130 million given by OWB’s subsidiary in Singapore, Dynamic Oil Trading (“DOT”), to Tankoil Marine Services. That credit created an irrecoverable debt when Tankoil failed to pay for oil supplied to it by DOT.
OWB’s management have said that the credit line was not authorised by them and that the losses came as a complete surprise. The investigation will centre on whether there was any wrongdoing connected with these losses. Investors had previously raised concerns about the hedging positions and sought confirmation that any hedging was with the aim of minimising the risk to the company of fluctuating oil prices rather than an attempt to make a profit.
OWB’s bankruptcy has led to a number of complex disputes around the world between OWB and its fuel suppliers for payment.
- In some cases, OWB supplied fuel directly to shipowners/charterers. In others, OWB subcontracted the supply of fuel to third party suppliers. This has led to some shipowners/charterers facing competing claims for payment from both OWB and third party suppliers.
- Some third party suppliers have been trying to recover unpaid oil by seeking to arrest ships in order to enforce maritime liens or retention of title claims. Whether these attempts are successful is likely to depend on a number of factors, including the specific terms of the supply contracts and subcontracts, their governing law and the jurisdiction in which the ship is located.
- The question of who is entitled to payment is further complicated by the fact that many of the claims for payment are no longer owned by OWB or other suppliers but had already been assigned to banks.
- The collapse of OWB has left other bunker companies at risk of bankruptcy, not only due to debts owed by OWB, but also because their own suppliers are now demanding cash payments or bank guarantees before releasing fuel to them.