Bankruptcy filing deepens woes for cocoa firm hit by Brexit

[LONDON] The US unit of Transmar Group, which supplies cocoa products to companies including Nestle SA, has filed for bankruptcy as financial turmoil spreads from the firm's European business, which was hit by the Brexit vote.

Transmar Commodity Group Ltd sought court protection from creditors on Dec 31 in Manhattan and owes more than US$400 million to banks and other creditors, a filing showed Tuesday. The firm plans to operate during the proceedings, the unit's Chief Restructuring Officer Robert Frezza said.

The Chapter 11 filing comes a month after the group's German unit, Euromar Commodities GmbH, declared insolvency. A cash crunch in 2016 led the company to delay payment to some suppliers, people familiar with the matter said in December. Problems at the unit worsened after the UK's June vote to exit the European Union weakened the pound and drove up prices for London cocoa futures.

Transmar provides products including cocoa beans, butter and powder to the confectionery industry. Euromar is one of Transmar Commodity Group's biggest customers.

Euromar had entered into various "unfavorable" forward-purchase contracts, including unhedged deals, Frezza said in the filing. That led to "enormous" losses when cocoa prices turned against the firm and also caused "substantial financial distress" to Transmar, he said.

Cocoa futures reached a six-year high in London two weeks after the Brexit vote. They've since tumbled 28 per cent as supply increases from West Africa.Transmar's lenders said there's an outstanding principal balance in secured loans of about US$359.9 million plus US$4.7 million in accrued but unpaid interest, the filing showed. Unsecured loans total about US$40 million. Amerra Capital Management LLC is owed US$8.7 million. Unsecured creditors shouldn't expect to recover anything, according to the Dec 31 filing.

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