Impact of Transmar bankruptcy goes beyond soft commodities

The bankruptcy of a top 10 supplier of cocoa beans and processed products has had an impact beyond “soft” agricultural commodities such as cocoa and coffee, with leading independent oil and metals traders facing increased questions about risk and compliance from their banks.

Transmar Commodity Group, which filed for Chapter 11 in the US last December, owing its creditors more than $400m. Its client list included leading chocolate makers such as Hershey, Mars and Nestlé. ABN Amro, provided a credit facility to Transmar alongside other top commodity financing banks such as Société Générale, BNP Paribas, Natixis, Macquarie and the Bank of Tokyo-Mitsubishi.

Guillaume Vermersch, chief financial officer of Mercuria, one of the world’s top commodity trading companies, said banks had increased scrutiny around the “borrowing base” credit facility, a popular form of lending especially in the US for commodities companies.

“We have already engaged with these banks to understand what happened and to help them mitigate these weaknesses in that kind of financing facility,” said Mr Vermersch, at the Financial Times Commodities Global Summit in Lausanne.

Daniel Hines, finance chief of Castleton Commodities International, said that the increased questions from the banks around risk management was “fair” while Gunvor’s chief finance officer Jacques Erni, said there was a rise in the interest among bankers to get a deeper understanding of the business. “I’m not sure if its due to Transmar, but we’ve seen a real increase in direct meetings with banks coming to meet with our risk people, our credit risk people and our compliance people.”