Aegean Chapter 11 is Not Another OW Bunker, Supplier Stresses

Aegean Chapter 11 is not another OW. Image Credit: Ship & Bunker / Pixabay

Aegean's Chapter 11 restructuring is not a repeat of the bankruptcy that OW Bunker infamously suffered in 2014, and the supplier's counterparties are not exposed to the same risks as OW's were.

That is the message stressed by Aegean director and board member Tyler Baron, who told Ship & Bunker Tuesday there was some confusion outside of the United States over what the Chapter 11 Bankruptcy process entails.

"Given the turmoil in the wake of the OW insolvency we anticipated there would concern outside the US were there's a lot less familiarity with the Chapter 11 process, which is somewhat unique globally," said Baron.

"Chapter 11 is deigned to facilitate a reorganization of a business that remains a going concern and is a process that provides protections for the company to fix its capital structure and emerge in a healthier sate. In other parts of the world bankruptcy just means the lights go out and the employees are lockout out of the office the next day. This is a very different process."

A notable byproduct of the OW Bunker bankruptcy are the raft of so-called double payment claims, a situation that left buyers exposed to paying both OW as the middleman in the transaction chain as part of a contractual debt, as well as the physical supplier for the same physical bunkers.

"Mechanically there's no way for a repeat of the problems with OW because Aegean is a physical supplier. Every molecule of oil that is delivered to a customer is a molecule that the company has already paid for. That has always been the case; that was the case pre-petition, and that will continue to be the case as we move through the Chapter 11 process," Baron told Ship & Bunker.

Another key message from the supplier this week is that its operations have retuned to "business-as-usual" and suppliers, vendors, employees and all other critical partners continue to be paid.

"All suppliers and vendors were paid in full pre-petition, and the [debtor-in-possession (DIP)] financing, which is $75 million of financing incremental to what the company has been drawing on pre-petition, will continue to pay vendors and suppliers in full in regular course as part of this process," said Baron.

"There are no issues with vendors or trade facing counterparts not being paid."

Aegean's Chapter 11 process is on track to conclude at the end of February, with Mercuria Energy Group Ltd tipped to be in pole position to buy the bunker supplier.

The Swiss commodity trader has already lodged a $681 million bid to buy the company.