Noble Group

[BlueDogMeow]

truly a long term investor*

[financiallyfree]

I thought it was interesting that mitsubishi will willing to pay 44% premium to olam's last traded price while noble grp has not found a white knight after so long. Of course mitsubishi might be looking for specific niches/ commodities but well, it shows there are still buyers out there with cash but there seems to be no interest in noble so far.

not vested

[greengiraffe]

Grave implications for Noble and other trading houses

http://www.valuebuddies.com/thread-5901-...#pid119418

[Behappyalways]

Mines in America's Coal Country Just Sold for a Total of Nothing
http://www.bloomberg.com/news/articles/2...of-nothing

[CityFarmer]

The chairman finally agree to compromise, not to step down, but to reduce his inferences...

(not vested)

Noble Group says chairman Elman steps down from 2 board committees
23 Sep 2015 17:59
[SINGAPORE] Singapore-listed commodity trader Noble Group Ltd said on Wednesday its chairman Richard Elman has stepped down from two board committees.

Mr Elman has stepped down as a member of the audit committee and the nominating committee, Noble in a statement.

Two independent directors have been appointed to head two other committees that oversee remuneration and options as well as corporate social responsibility and government relations.

REUTERS

Source: Business Times Breaking News

[greengiraffe]

http://www.valuebuddies.com/thread-5901-...#pid120250

[CityFarmer]

It seems Noble has more problem than just financial one...


Noble Group loses two top energy executives, sources say

SINGAPORE (Oct 2): Two senior US-based energy executives have left commodity trader Noble Group ( Valuation: 2.00, Fundamental: 0.35) in the past week, sources said on Thursday.

Brian Falik, the company's global head of energy capital since 2012, and Andrea Valerio, Stamford, Connecticut-based managing director of oil liquids, have both resigned, according to three people familiar with the matter.

Valerio had been with the company for over nine years and was responsible for trading oxygenates, including ethanol, MTBE and methanol.
...
http://www.theedgemarkets.com/sg/article...ources-say

[greengiraffe]

Are mysterious commodities traders like Glencore and Noble too big to fail?
DateOctober 2, 2015 - 6:27PM

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[Image: 1425525330490.png]
Jonathan Shapiro
Senior Reporter

[Image: 1443774448385.jpg]

Ivan Glasenberg, chief executive of Glencore, has watched a large portion of his fortune disappear in the past week. Photo: Bloomberg

When Glencore's share price plummeted on Monday and billions of dollars of its chief Ivan Glasenberg's wealth vanished into thin air, a company spokesman moved to dismiss an outlandish comparison to Lehman Brothers.
There was no global catastrophe and Glencore had neither the business model nor the indebtedness of that collapsed US investment bank, we were assured.  
But this was indeed a very "Lehman-like" moment. The tissue that connects the physical and financial worlds, which almost snapped in 2008, was strained. And the realisation that global commerce can grind to a halt if trust in the system evaporates became apparent again.
Too big to fail?
On Monday we were forced to confront a question pondered first three years ago at an obscure gathering in Calgary, Alberta: Were the world's commodity traders too big to fail?
The man who asked it was Timothy Lane, the Bank of Canada's deputy governor in a 2012speech that touched on many of the issues that had some in the market unsettled this week as Glencore teetered.
Calgary was a boom town as Chinese demand for resources fuelled a super cycle that was sucking up Alberta's rich coal, oil and gas deposits. But Lane, conscious of the town, the state and the nation's dependence on natural resource wealth, asked just how important these ever-larger, yet mysterious, trading houses had become to global finance.
As the world's banks have retreated from trading and financing commodities, Lane explained, trading houses have stepped up and morphed their funding models. They began to source debt directly, selling billons of high-grade and junk bonds, and began to make increased use of collateralised funding – borrowing against stockpiles of commodities. This form of funding is crucial to financial brokers, who pledge "risk-free assets" as security in their financial trading books. Meanwhile, the banks were forced to innovate to remain active in a lucrative line of business.
But the retreat of the banks, the rise of these traders and the broader financialisation of commodities led Lane to ask whether a failure of one of the large, market-making trading houses could cause "serious disruption" to commodities markets and whether it could have "knock-on effects on the financial system".
"We are far from having answers to those questions, but they need to be addressed," he said.
Secretive firm
Lane didn't mention them by name but Glencore, the trading giant with more than $US200 billion ($284 billion) of revenue, would have been in his thoughts, particularly as it circled Canadian grain handler Viterra.
This secretive firm headquartered in the Swiss canton of Zug traces its roots to tax fugitive Marc Rich, a man President Bill Clinton pardoned on his last day in office. Rich, a legendary oil trader who was a vital link between mineral-rich Third World governments and mineral-hungry developed nations, was succeeded by South African accountant Ivan Glasenberg. Glasenberg worked his way up from a coal trader, via a US business school, to become one of the richest and most powerful men on the planet.  
"Ivan the Terrible" had a fearsome reputation at the head of one of the world's largest private companies, of which he had a large stake. But he stressed the quality of building and investing in relationships over decades, whether it was an African despot or a Polish coal trader in search of a good time.
Glencore might have been a goliath in the commodities industry but it was known to few outside it. The exception was ambitious South Africans who graduated with accounting degrees from Wits, where Glasenberg had studied. To them Glencore was a chance to trade their 20s for a shot at being multimillionaires in their 30s. Macquarie's millionaire factory or even Goldman Sachs paled in comparison.
The mystique of Glencore loomed large. Out in the open air it owns and operates mines around the world, but the heart of its operations was its closeted commodities trading and marketing business.
From its various outposts Glencore traders orchestrated the movement of raw materials like copper and wheat around the world, in a quest to capture the differences in prices that might arise.
"Arbitrage is the glue that binds together markets that are separated by distance and time, as well as markets for different but related products," Lane said in his 2012 speech.
In fact, shifting commodities around the world has been one of the few consistent ways to profit from resources that over centuries have fluctuated unpredictably in price, destroying fortunes as rapidly as they have created them.
Buying commodities "in regions where there is a surplus and selling them where there is scarcity" has "over hundreds of years proved to be the way to make money", Australian hedge fund manager Adrian Redlich, of Merricks Capital,  told AFR Weekend.
Credit is key
Natural resources are the realm of the physical. But to enable  the flow of materials from the farms, coal pits and oil fields to the factories, mills and plants requires a vital ingredient: credit. This is the lubricant of commerce and commodities and when bulk exchanges are taking place, credit, trust and counterparties are crucial elements in the equation.
Glencore's size and access to credit was a key advantage, as was its knowledge and partial control of many large commodity markets.
To lubricate Glencore's logistical machine requires funding, which it has secured through billions of dollars in credit lines from the banks and through longer-term debt secured from the capital markets. Heading into September, Glencore had about $US50 billion of debt, with $US30 billion tied to its mining assets and the remainder used to fund its trading.  
But occasionally Glencore has felt the pinch of the credit markets, such as during the 2011 European sovereign debt crisis, when lenders tightened the provision of trade finance.
At the depths of the global financial crisis in 2008 Glencore was almost suffocated. The cost of insuring against a default soared to more than 3000 basis points, as plunging commodity prices hammered its collateral and unnerved its lenders and counterparties, which would pay almost any price to cut their exposure. At that level, the credit market was prepared to write off 30 per cent of the value of Glencore debt just to insure it would get the remainder back.  
Without access to affordable credit, Glencore was close to death. But some deft asset shuffling, a capitalisation – which came in the form of staff agreeing not to draw their big bonuses – and a recovery in commodities led to a great escape. 
Shaken, Glencore began the process a year later of taking the company public, when it raised $US2.2 billion through a convertible bond. In 2011 it floated on the London stock exchange, minting Glasenberg's enormous wealth.
Access to capital
Privacy had once given Glencore an edge, and Glasenberg certainly didn't seem to relish the prospect of the additional public scrutiny. But far more important was access to permanent sharemarket capital. Glencore's investment-grade credit rating would be the paramount component of its future success and access to equity markets was vital in securing it over the long run.
Besides, Glasenberg had ambitions to merge with Zug neighbour Xstrata and ultimately make a play for iron ore giant Rio Tinto, which he was beginning to pressure as falling iron ore prices hurt the miner.     
But his ambitions all come unstuck rather rapidly. Glasenberg might be feared and respected in the Kingdom of Commodities. In the Socialist Republic of Hedge Funds he was neither feared nor respected, but targeted as vulnerable, overexposed and overleveraged. Here, he was the poster boy of the super-cycle bust.
Glencore wasn't the only target. Hong Kong-listed Noble Group, which has an equally fearsome reputation, had been battling short sellers and an anonymous researcher,  believed to be a former employee, who raised questions about its business model.
And in 2012 Singapore-based soft-commodities trader Olam was targeted in a similar vein by well-known short seller Carson Block, of Muddy Waters. These trading businesses have common traits: they are dependent on debt, they are exposed to commodity prices, and their business models are opaque and difficult to value. It's a toxic concoction, which has lured hedge funds looking for the most effective way to play a slowdown in China and made it tricky for the companies to defend themselves.  
Black box trading strategies
John Burbank, of San Francisco-based Passport Capital, has one of the most prominent and reputable bets against Glencore.
His case was built on Glencore's "tremendous amount of debt", its leverage to base metals such as copper and an "under-examined black box of its trading strategies, which is now becoming understood better", he told CNBC. 
Under increased pressure from the market Glasenberg relented, shoring up Glencore's balance sheet with a $US2.5 billion equity issue in September  as part of a $10 billion capital injection, at immense personal cost.
The move was meant to ward off the short sellers but there was no relief, as Glencore's share price fall accelerated. When an analyst at South African bank Investec questioned Glencore's solvency if commodity prices continued to fall, it triggered a loss of faith, and a harrowing 30 per cent plunge on Monday.
The bigger story might not be in the falling equity price, which has taken with it $5 billion of Glasenberg's wealth. The reaction in the credit markets is perhaps far more telling of how Glencore's woes could escalate into something more systemic and serious. 
Deep distress
The cost of insuring against a default on Glencore debt over five years soared from an already-high 550 basis points to an astronomical 1000 basis points this week, having traded at about 300 basis points the week before.
At 1000 points buyers of credit default swap are paying a 10 per cent premium of face value to insure against a default. Those sorts of spread indicate deep distress.
Glencore's credit default swap  curve became inverted – when the market pays more to protect against an immediate default than it does to protect against one in five years. In fact, the cost of one-year insurance reached almost 1200 basis points, more than 10 times its five-year average of 90 basis points.  
In much the same way that commodity futures are used by real producers to hedge against future moves, credit default swaps  are used by banks and other lenders to hedge their credit risk. Judging by the extent of the credit default swap  moves, the lenders, and the credit world at large, had exposed itself significantly to Glencore. 
The unfortunate perversity of markets is that they transmit signals, even if they might be false. Faith is questioned and panicked responses from nervous lenders create a negative feedback loop that is hard to break. Corporate bankers who  manage these accounts can't stomach the cost of high hedging, so the response instead is to cut lines of credit, as do other counterparties with outstanding deliveries.
Meanwhile, those in the market for insurance look for cheaper options. This pushes up the credit insurance costs of commodity trading peers, and even miners, in turn pushing down the price of bonds, and increasing the cost of funding. The signal is reinforced, so that financial fear morphs through the credit markets into physical pain.
That is exactly what happened to Glencore, BHP Billiton and Rio Tinto in late 2008. Rio had to repay $18 billion of debt used to fund the disastrous Alcan purchase by 2010, but the credit markets were trading as though it would fail before then. Rio one-year credit default swap  spreads blew out to 1000 basis points.  
Credit traders at the big banks asked who would pay 10 per cent of the value of Rio's debt just to make sure they got the rest back in one year, and before most of its debt was due? But if the traders took the elevator they would find out. The balance sheet risk managers at Australia's big banks were so desperate to cut exposure that they had an almost inelastic demand for commodities-related debt insurance. They were prepared to pay any price and did. The same applied to banks around the world that realised just how exposed they were to these resource firms. 
Lender of last resort
This week's convulsions in the credit markets might not have been quite as dramatic as 2008, but served as a fascinating reminder that while the financial system might have evolved since the crisis, trust is a fickle commodity. Glencore might be perfectly healthy and comfortably investment-grade quality, but as the banks found out in the wake of the Lehman collapse, that isn't always enough.
Crucially banks that remained standing had one crucial advantage that will never not afforded to Glencore – access to a lender of last resort.
Which brings us back to Lane's question: What if Glencore does experience a Lehman moment? Would commodities still be able to flow through the globe? What would that mean for the people of Alberta, the coal miners of NSW?   
In 2008 few appreciated how global commerce had come to rely on short-term money markets to provide the working capital to stock the supermarket shelves, put petrol in the pumps and pay wages. Would a failure of commodities traders cause similar chaos? For those towns, provinces, states and nations that depend on the flow of raw materials around the world, they hope to never find out. 

[greengiraffe]

It seems Noble has more problem than just financial one...


Noble Group loses two top energy executives, sources say

SINGAPORE (Oct 2): Two senior US-based energy executives have left commodity trader Noble Group ( Valuation: 2.00, Fundamental: 0.35) in the past week, sources said on Thursday.

Brian Falik, the company's global head of energy capital since 2012, and Andrea Valerio, Stamford, Connecticut-based managing director of oil liquids, have both resigned, according to three people familiar with the matter.

Valerio had been with the company for over nine years and was responsible for trading oxygenates, including ethanol, MTBE and methanol.
...
http://www.theedgemarkets.com/sg/article...ources-say

ST cited 1 more departure:

http://www.straitstimes.com/business/thr...oble-group

The group's global head of mergers and acquisitions (M&A), Ms Ellen Chon, has resigned, marking a string of recent senior-level departures at the commodities trading firm.
Ms Chon, who has been with the company for more than six years, is currently on leave, said the people, who declined to be identified as they were not authorised to speak to the media.

It was not immediately clear where Ms Chon, who had previously worked at Goldman Sachs, was going.
The resignation of Hong Kong-based Ms Chon comes as the commodity downturn is dimming the prospects for commodity traders and producers.

[greengiraffe]

EIG, Noble joint venture bids for Santos assets

• DOW JONES NEWSWIRES
  
• OCTOBER 03, 2015 4:30AM
  

An energy venture controlled by Hong Kong commodity trader Noble Group and US private-equity firm EIG Global Energy Partners has bid for assets being auctioned by energy company Santos, said people familiar with the matter. 

The venture, Harbour Energy, is seeking to buy Santos assets in Australia and Asia, said one person with knowledge of the process. Harbour Energy also has discussed other potential transactions with Santos's senior management, the person said. 

Specific details about the assets or their value weren't available. Two people familiar with the auction said assets Santos is selling include a package of Western Australian assets valued at about $US1 billion as well as Southeast Asian assets valued at $US500 million to $US750m. 

Santos said in August that it would conduct a strategic review of its business, hiring Deutsche Bank and Lazard as advisers. On Wednesday, Santos said it is considering "a range of options" including asset sales, structured finance transactions, restructuring and capital market transactions. 

The company's value more than halved over the past year as lower oil prices led to cost cuts and reduced spending. First-half profits fell 82 per cent from the same period a year earlier to $A37m, while net debt rose 17 per cent to $A8.79bn during the six-month period. 

Harbour Energy, which is led by former Royal Dutch Shell veteran Linda Cook, was formed last year to buy energy assets world-wide. Noble set up the joint venture as part of a larger effort to focus on its trading business while relying on partners such as Washington, DC-based EIG to handle production of physical commodities. 

Harbour Energy has sought deals in non-US markets since oil prices dropped. The firm teamed up with Mexican conglomerate Alfa SAB in May to acquire Canadian-Colombian oil company Pacific Rubiales Energy for $US1.7bn, but the deal fell through in July because of insufficient shareholder support. 

The venture also has sought deals in the Asia-Pacific region. It bid on a stake in the Wheatstone liquefied natural gas project that Apache ultimately sold to Woodside Petroleum Harbour Energy has been pursuing an investment in Southeast Asia since the summer.