Bankruptcy Filing Deepens Woes for Cocoa Firm Hit by Brexit

  • Transmar Commodity Group seeks Chapter 11 protection
  • Supplier to Nestle, Mars owes over $400 million to creditors

The U.S. 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 $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 U.K.’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.

For more on Euromar’s financial problems, click here. 

Cocoa Prices

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

Closely held Transmar Group was founded in 1980 by cocoa trader Peter G. Johnson. It has more than 350 customers, supplying major U.S. and European chocolate producers including Hershey Co., Barry Callebaut AG and Guittard Chocolate Co. With factories in Europe and the Americas, it’s one of the world’s 10 biggest cocoa processors by capacity, according to Barry Callebaut. 

Joint Venture

Transmar Commodity Group, based in Morristown, New Jersey, formed a cocoa joint venture last year with Tokyo-based Itochu Corp. The Japanese firm acquired a stake in the venture of just under 20 percent.

The cocoa-processing industry is concentrated in the hands of several companies, including Olam International Ltd. and Cargill Inc.

“Nobody wants to see Transmar go away,” said Nick Gentile, a former cocoa trader and now managing partner at NickJen Capital Management & Consulting in Staten Island, New York. If Transmar can’t reorganize under bankruptcy protection, one of those rival processors will probably bid for whichever assets are attractive, he said by phone.

Peter G. Johnson, the chief executive officer of Transmar Group, and Peter B. Johnson, the group’s managing director for cocoa, didn’t reply to an e-mail and telephone messages seeking comment. Calls and an e-mail to a lawyer representing the company weren’t returned.

The case is In re Transmar Commodity Group Ltd., 1:16-bk-13625, U.S. Bankruptcy Court, Southern District of New York (Manhattan),

Before it's here, it's on the Bloomberg Terminal.