UPDATE 2-OW Bunker says at risk of bankruptcy after discovering fraud
* Company says discovered fraud by unnamed staff at Singapore unit
* Head of risk management fired as result of trading loss
* Owes $750 million to 13 bankstrue
* Shares suspended, had listed in March at 145 crowns
* Global bunker fuel market affected by OW Bunker in troubles (Add details, comments from bank)
By Ole Mikkelsen
COPENHAGEN/SINGAPORE, Nov 6 (Reuters) - Danish ship fuel supplier OW Bunker said it may go bankrupt after discovering fraud by unnamed senior employees in its Singapore-based subsidiary which will send it deep into the red this year.
"The company is at risk of going bankrupt. We have decided to file for the commencement of a court restructuring process," Chairman Niels Henrik Jensen told Reuters on Thursday. The group, whose shares have been suspended, said it had fired its head of risk management.
The extent of the fraud is not yet clear but preliminary findings suggest a potential loss of around $125 million, the company said, without giving details of the nature of the fraud.
At the same time, a review of the company's risk management contracts means further losses than previously announced now can be expected. An estimated trading loss of $24.5 million announced on Oct. 23 has been increased to around $150 million, the company added.
Jensen said Danske Bank and Nordea still supported the company but after 11 international banks withdrew their support, management decided to seek a court restructuring procedure.
Head of risk management Jane Dahl Christensen has been fired as a consequence of the trading loss.
"We have to get to the bottom of this as soon as possible. The impact to employees, shareholders and customers is terrible," Soren Johansen, partner at major shareholder Altor Equity Partners, said in a statement.
By revenue OW Bunker is the third-largest company in Denmark and it owes the 13 banks $750 million.
"This is major news and the loss is massive. Even for an oil company the loss is massive, let alone a bunker (fuel) trader," a Singapore-based oil trader said.
Last year's revenue of $17 billion was comprised by both derivative trading and physical delivering of ship fuel to shipping companies. Less than half the revenue was based on physical distribution.
OW Bunker is estimated to have a market share of around 7 percent of the global market for bunker fuel, competing with companies such as World Fuel Services Corp, Chemoil Energy and Aegean Marine Petroleum Network.
European bunker traders told Reuters that bad hedging positions and possibly an aggressive approach linked to their IPO earlier this year had brought them down.
"Almost the whole market has exposure to them -- they were so big worldwide," said one trader and adding there could be some schadenfreude on the part of others, as OW Bunker had been so aggressive in taking business in the past few years.
OW Bunker is in discussions with syndicate banks and said it will inform the market further as soon as possible.
OW Bunker was listed on Nasdaq Copenhagen in March at 145 Danish crowns per share, giving it a stock market value of about 5.3 billion Danish crowns ($892 million). Morgan Stanley, Carnegie, Nordea and ABG Sundal Collier led the flotation.
Management has since twice downgraded profit guidance for the year.
"We strongly believe that we have conducted a thorough and correct process assisting OW Bunker in the IPO process as book runner," a Nordea spokesman said.
OW Bunker shares closed at 83.50 crowns on Wednesday. The company has around 20,000 shareholders, with private equity firm Altor Equity Partners the biggest shareholder with 35 percent.
The news is expected to impact IPO activity on the Danish stock market.
"This case is damaging for investors and the stock market. The stock market is dependent on trust between the companies and its investors. And a case like this does not exactly help new companies in their dialogue with investors," Carsten Borring, head of listings and capital markets at Nasdaq Copenhagen, said.
($1 = 5.9409 Danish crown) (Additional reporting by Teis Hald Jensen in Copenhagen, with Jessica Jaganathan and Jane Xie in Singapore; Editing by Stephen Coates and David Evans)
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- November 6, 2014
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