Noble Group

[BlueKelah]

well there could still be a prolonged commodity downturn making commodity collateral worth much less and cause problems for further funding. Especially if a global recession or GFC comes about again at this bad time and there is tightening of credit, the banks could make a "margin call" and essentially "takeover" Noble.

Still a high risk high return stock with murky accounting.

caveat emptor...

[specuvestor]

Noble will always have near term debt for working capital purpose. That's the nature of its business. Just as banks are leveraged business so any point of time we can cite overleverage as a concern. More difficult question is how they manage their business.

If this $3.5b renewal goes through I think the worst is over. It also demonstrates it has real commodity in transit to be collaterialsed. They had been paying back their bonds ie CNY and MYR bond in Jan and THB2.85b bond due in April.

It's been 9 months since the Mr Dee saga and Iceberg's 4th letter is inconsequential. Valley of death probably passed.

I concur. While I am still confused by its derivatives, but I reckon, you have put up a good insight on its current state.

I reckon, the debts, as part of the business needs, have became more expansive, with the collateral, right? In the past, the debts are mostly non collateralized, right?

(not vested)

Nobody truly understands the derivative exposure of a bank either but I'm assuming PWC did a good job on their special audit and the banks' heightened anxiety will ensure there is real asset underlying. So far there has not been funny debt restructuring

Technically when the loan is collateralised the interest cost should be lower but I reckon it would not be big difference from the last revolver due to anxiety.

@Bluekelah If there is a prolonged commodity downturn, sales and margins will be affected and credit as well, irrespective of whether the accounting is murky. Past 12 months with or without Iceberg, commodities including OnG players had been hit hard.

@CY09 Accounting is actually an art rather than science. There are Principles / Standards of Accounting but no rules or law of accounting. Let's say Workfare Income Supplement... should it be booked as income or contra employee expense? Should biological assets be revalued? Accounting is always a pale shadow to give us a brief understanding and outline of the companies' financials, and to me most importantly cash-flows. To understand a company goes beyond just the financial reports, but we do need to know roughly how the accounting system works.

[CityFarmer]

I have seen, a totally different Chairman Richard Elman...

Noble's chairman says you just can't tell when market will turn

SINGAPORE (March 22): Noble Group Ltd. founder and Chairman Richard Elman, with more than five decades of experience in commodities, said that you simply can’t tell when raw material markets are turning, evoking wartime British prime minister Winston Churchill to help make his point.

“We all know commodities are cyclical, but predicting when that turning point comes is only possible with hindsight, especially with such excessive moves,” Elman said in the Hong Kong-based company’s annual report, which was received on Tuesday. “Those who come hoping for some kernel of wisdom leave disappointed when I tell them that I don’t know how all the different factors will play out -- nor does anyone else.”
...
http://www.theedgemarkets.com/sg/article...-will-turn

[CityFarmer]

Latest update on the lawsuit...

Iceberg attacks: Setback for Noble in HK lawsuit
23 Mar 2016 09:00
By K.C. Vijayan Senior Law Correspondent

A Hong Kong court has rejected a bid by Singapore-listed Noble Group for summary judgment against a credit analyst and his firm - said to have published the controversial Iceberg reports on Noble.

The court found that French national Arnaud Vagner, who worked for Noble for over two years until June 2013, was justified in answering queries from Noble "the way he did". The queries were made in legal preliminaries in the run-up to the suit against him.

"The answers can be fairly described as 'further and better particulars of the defence and were made by (Mr Vagner) in good faith..." wrote Hong Kong High Court Recorder Linda Chan in judgment grounds released yesterday.
...
Source: Straits Times

[butcher]

Noble Group Said to Face Higher Financing Costs for New Loan
Javier Blas
Sandra Tsui


April 5, 2016 — 9:57 PM SGT

Commodity trader in talks with banks for $1 billion facility
Company said to offer margin of 2.25 percentage points


Noble Group Ltd., the junk-rated commodities trader, is facing much higher financing costs to arrange an unsecured loan of at least $1 billion, according to three people with knowledge of the terms.

The Hong Kong-based company, which started marketing the one-year revolving credit facility this week, is offering to pay 2.25 percentage points more than the London interbank offered rate, the people said, asking not to be identified because the talks are private. That compares with the 0.85 percentage-point spread Noble paid last year for a similar loan.

The financing signals that banks are still willing to support the embattled trading house, though they’re tightening the leash by requiring much higher margins. Noble Group has been under increasing pressure since Moody’s Investors Service Inc. and Standard & Poor’s cut its debt rating at the turn of the year amid collapsing commodity prices.

The new loan, which could expand to as much as $1.5 billion depending on the appetite of lenders, will help refinance two other facilities maturing next month -- a 364-day and a three-year loan -- valued at almost $2.2 billion combined, the people said.
The company declined to comment.


Financing Talks
Noble Chief Executive Officer Yusuf Alireza needs to refinance various loans before they expire between mid-April and the end of the year. Discussions with banks are “well advanced,” he said Feb. 25 as the company posted its first annual loss since 1998.
Noble’s shares were hammered in 2015 after the company’s accounting practices, including how it values long-term contracts, were criticized by the anonymous group Iceberg Research.

Eight banks are arranging the new revolving credit facility, the people said. They are Mitsubishi UFJ Financial Group Inc., Commonwealth Bank of Australia, Cooperatieve Rabobank, DBS Group Holdings Ltd., HSBC Holdings Plc, ING Groep NV, Societe Generale SA and United Overseas Bank Ltd., they said.

In addition, Noble is working with banks to arrange its largest ever loan backed by inventories. The trader is seeking $2.5 billion in a so-called borrowing-base facility guaranteed by oil, with the potential to expand to $3.25 billion if commodity prices rise over the next year, people familiar with the matter said last month. Noble is offering to pay a rate starting at 1.6 percentage points more than Libor for the secured loan.

Noble previously relied mostly on unsecured loans, with only a $450 million secured loan backed by oil stored in the U.S. That facility was increased to $1.1 billion last year.


http://www.bloomberg.com/news/articles/2...r-new-loan

[dydx]

Assuming Noble is lucky enough to secure the refinancing facilities from banks - which themselves are in a severe position, i.e. if they don't support the refinancing request, Noble would likely end up in a massive default! - going forward the margins of its business will be under further squeeze, due to the significantly higher credit spread and interest cost the group has to pay to its bankers under the new borrowing facilities.

This is a risky situation evolving for both Noble and its bankers - a position I would rather not to be in!

[CityFarmer]

Assuming Noble is lucky enough to secure the refinancing facilities from banks - which themselves are in a severe position, i.e. if they don't support the refinancing request, Noble would likely end up in a massive default! - going forward the margins of its business will be under further squeeze, due to the significantly higher credit spread and interest cost the group has to pay to its bankers under the new borrowing facilities.

This is a risky situation evolving for both Noble and its bankers - a position I would rather not to be in!

A more feasible valuation now, is based on asset value. If the liquidation value is much lower than market value, the risk involved is much lower. The catch is the estimation of liquidation value is difficult, if not impossible, for me.

(not vested, and wish derivative valuation is one of my circle of competencies   )

[Reyes]

jia lat... noble a noble.... recently so volatile ....

[BlueKelah]

Assuming Noble is lucky enough to secure the refinancing facilities from banks - which themselves are in a severe position, i.e. if they don't support the refinancing request, Noble would likely end up in a massive default! - going forward the margins of its business will be under further squeeze, due to the significantly higher credit spread and interest cost the group has to pay to its bankers under the new borrowing facilities.

This is a risky situation evolving for both Noble and its bankers - a position I would rather not to be in!

A more feasible valuation now, is based on asset value. If the liquidation value is much lower than market value, the risk involved is much lower. The catch is the estimation of liquidation value is difficult, if not impossible, for me.

(not vested, and wish derivative valuation is one of my circle of competencies   )

The problem is even someone expert at derivative valuation will not be able to produce any dependable valuation as the data from Noble finances is already somewhat mysterious. Even simple non-derivativce investment like the Yancoal one is not properly reflected, the other derivative investments will probably also not be reported as up to date as well.

Who knows maybe there is no asset left but a mountain of debt and liability once any hidden derivative losses are properly reflected a.k.a Enron...

S&P has already rated Noble as Junk, I would say its just a speculative play on commodities at the moment. Valuation of such company is kinda pointless...

[momoeagle]

Personally, I think Noble is worth the risk purely based on the balance sheet data. If it defaults, and sells off all its assets, current prices are still 40% from its NAV.

The main risks of its assets come from trade receivables which may or may not be claimable. The risks of that happening, my subjective opinion, may not be as high, given that the nature of its business is now primarily in the energy sector, and its customers consists of power plants. I may be wrong.

If it defaults, I think it has pretty substantial implications to the energy sectors worldwide.

Furthermore, I believe that many of the bad news has already been priced in over the last few months. Commodities generally are in bad shape, and not in favour, which gives an opportunity to own Noble with a greater margin against its asset value.


Bought in small yesterday, for a 6 months horizon. I might be wrong for this; it's also not within my circle of competency. Just a risky attempt to be on the opposite side of the camp.

(Vested as of yesterday)