U.S. Chemical Distributor JLM Bankrupt

Mid-May the news broke that JLM Industries Tampa, Floa., U.S., has closed because the company's equity funding firm became insolvent and was forced to withdraw cash and credit. "In today's banking ­environment it was impossible for JLM to secure a new working capital line," said Sean D. Macdonald, JLM's Chairman. JLM Industries, one the largest chemical distribution company in North America, had been in business for more than 20 years and had 2008 sales of $330 million with 30 million gallons of domestic storage in 275,000 square feet of warehouse and a fleet of 20 tankers and 150 railcars. The firm also had merchant sales offices in Venezuela, Brazil, India, Spain, Turkey, Russia and China.
Marc Fermont of Districonsult comments on the JLM Industries bankruptcy: "It is an unusual and surprising event for such a large and reputable distributor ranked distributor number 10 in North America to suddenly declare bankruptcy. The JLM Industries' financial construction was the result of unusual developments. In 2003, John McDonald, CEO and Philip Sassower, a Director and major shareholder took the Delaware-based company JLM Industries private. Philip Sassower ­involved a private equity firm he created called Phoenix ­Enterprise of New York which provided all the company's equity in the form of bank collaterals. In 2009, Phoenix ­Enterprises became insolvent and this pushed JLM into bankruptcy. Phoenix's bank guarantees were invalid. The credit losses for the suppliers and bankers could be between $200 and 300 million or higher. In the future, bankers will be more careful when they are offered bank guarantees or collaterals issued by some private equity firms. Financial transparency will become the order of the day in Europe and North America. It is a sad ­development for the distributor industry which could impact private equity relationships with their bankers."