Bartering for Business

Here is an interesting story about Jon Huntsman, who bartered his way to billionaire status.

Here's how Huntsman's barter activities worked. He recalls, "Arco Chemical had polystyrene that we needed. But they needed styrene monomer to make the polystyrene. They had a 100%-owned division in Pittsburgh named Oxyirane. Oxyirane had a large supply of styrene monomer, so we simply bought the styrene monomer from a 100%- owned subsidiary of Arco, turned around and sold it to Arco, and made $600,000 profit in one day."

Few banks were willing to finance these transactions, but among the few that issued letters of credit to back barter deals were Bankers Trust of New York and First Security Bank of Utah.

"None of them understood what they were doing. It was only through my sheer force of convincing them it was a binding deal," says Huntsman today. "We had a sale at the end of the barter before we paid for the first product at the beginning of the trade. Before we bought the first one, we had the final one sold, so the banks knew we couldn't lose on any transaction."

I'm sure his accountants loved that.

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