Phibro To Shut US Business

   (FROM THE WALL STREET JOURNAL 12/10/14) 
   By Christian Berthelsen 

Phibro Trading LLC is closing its doors in the U.S., marking the end of an era for a commodities firm that came to prominence under oil trader Andrew Hall.

The 113-year-old company, founded in Germany by two scrap-metal dealers, is winding down its U.S. operations after it failed to find a buyer, according to a person familiar with the situation. The sale process for units in London and Singapore continues, the person said.

Phibro specialized in physical trading of oil and other raw materials, seeking to profit by moving actual barrels and acting as an intermediary between producers and consumers. The pool of potential buyers for these kinds of operations has dwindled in recent years amid a regulatory crackdown on Wall Street banks' involvement in these markets.

Mr. Hall is expected to continue trading energy derivatives through his $3 billion hedge fund, Astenbeck Capital Management LLC, which has avoided taking much of a hit from this year's plunge in oil prices because Mr. Hall curtailed bets and shifted to holding cash.

Public furor over a $100 million payday for Mr. Hall in 2009, when Phibro was part of Citigroup Inc., spurred the trading firm's sale to Occidental Petroleum Inc. Citigroup was criticized for guaranteeing Mr. Hall a hefty bonus at a time when the New York bank required a bailout from the U.S. government.

The effective demise of Phibro underscores investors' fading interest and the challenging trading conditions in many energy and commodity markets, which in recent years have been pummeled by the combination of rising supplies and tepid demand growth. Mr. Hall reaped huge profits by correctly betting on rising commodity prices in the 2000s, which was driven by rapid growth in China.

Phibro employees were being notified of the developments Tuesday, according to the person. Analysts have said Phibro added little to Occidental's financial performance and that executives were uncomfortable with the volatility it sometimes brought to results. Earlier this year, Hess Corp. also sold its internal trading arm, Hetco.

Occidental in February said it was pulling back from proprietary trading of crude oil and other commodities amid a corporate reorganization, and a spokesman on Tuesday reiterated the Houston company's plans to reduce exposure to these activities.

Phibro executives had been shopping the operation to prospective buyers since the February announcement, according to another person familiar with the situation.

A person familiar with Phibro's recent state of operations said it has retained little of its heft at its prime. More recently, the firm's activities have centered on trading blends of North Sea crude oil.

Founded as Philipp Brothers in the early 1900s, Phibro went on to become at one point the largest supplier of raw materials in the world. In 1981, it acquired investment bank Salomon Brothers, and the trading firm became part of Citigroup in 1998.

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