Noble Group

[CityFarmer]

A large consortium of banks are backing it (including DBS and UOB).

Based on the recent banks that were underwritters for the rights, I think the major bankers are: HSBC, Morgan Stanley, DBS, SocGen and ING bank

One of the competitive edges of CTFs, is credit facilities from a diverse group of bank globally, rather than from the heavily weighted support from few selected banks. Noble has done well on that, and probably one of the key reasons of survival till today.

Availability of credit facilities, is important, but low-cost financing is also very important. Noble's recent restructuring of debt from non-secured, to secured debt, is a good move, IMO. It has kept the cost low, and better matching of liquidity for the asset and debt, IMO

[CityFarmer]

The top priority, is the liquidity issue. We should be able to see significant improvement, by end of the year, IMO.

(vested)

Noble Group sacrifices profit in pursuit of cash after loss
12 Aug 2016 09:09
[SINGAPORE] Noble Group Ltd has conceded it needs to pursue cash over profit.

After posting a second-quarter net loss of US$54.9 million and an increase in net debt, the commodity trader said its priority is boosting cash flow ahead of earnings. Reeling from a two-year collapse in its share price, the company is holding back capital from more profitable parts of the business as it works towards a target of raising US$2 billion.

In a tumultuous??18 months, Noble Group has lost its blue chip status and investment-grade rating amid sliding commodity prices and attacks on its accounting.

Former CEO Yusuf Alireza quit in May and days later the company announced an emergency rights issue and said founder and chairman Richard Elman would step down within 12 months.??It's cutting jobs, selling assets and exiting some markets as it seeks to prop up its finances.

"It's still too early to talk about profitability for this company because they're still focusing on deleveraging and resolving liquidity issues," said Margaret Yang, a strategist at CMC Markets in Singapore.

"They'll have to resolve their liquidity issues and overcome this tough period before we can see a real turnaround in this company."
...
BLOOMBERG

Source: Business Times Breaking News

[weijian]

A large consortium of banks are backing it (including DBS and UOB).

Based on the recent banks that were underwritters for the rights, I think the major bankers are: HSBC, Morgan Stanley, DBS, SocGen and ING bank

One of the competitive edges of CTFs, is credit facilities from a diverse group of bank globally, rather than from the heavily weighted support from few selected banks. Noble has done well on that, and probably one of the key reasons of survival till today.

Availability of credit facilities, is important, but low-cost financing is also very important. Noble's recent restructuring of debt from non-secured, to secured debt, is a good move, IMO. It has kept the cost low, and better matching of liquidity for the asset and debt, IMO

That looks about right in theory. But in actual practice, if one bank pulls out or has rumors of doing so, wouldn't the others? It's 1 big fraternity circle within the banking circle and no one wants to have the bill when the punch bowl is in their hands. From some of the real case studies I have read in the demise of Long Term Capital and Lehman Bro, that always seem to be the case. The old adage "Bankers only lend you the money when they know you don't need it" seems to hold true in most circumstances. I believe bankers are like humans, and so they can exhibit lemming-like behavior, just like the hapless OPMI.

Credit is always available in the good times as long as banks are willing to accept the trade finance/letter of credit etc. Banks make a lot of money from these, don't they? I suspect Noble doesn't have the edge over other commodity firms. If they did, there wouldn't be a need to sell key assets to raise cash I suppose?

[CityFarmer]

A large consortium of banks are backing it (including DBS and UOB).

Based on the recent banks that were underwritters for the rights, I think the major bankers are: HSBC, Morgan Stanley, DBS, SocGen and ING bank

One of the competitive edges of CTFs, is credit facilities from a diverse group of bank globally, rather than from the heavily weighted support from few selected banks. Noble has done well on that, and probably one of the key reasons of survival till today.

Availability of credit facilities, is important, but low-cost financing is also very important. Noble's recent restructuring of debt from non-secured, to secured debt, is a good move, IMO. It has kept the cost low, and better matching of liquidity for the asset and debt, IMO

That looks about right in theory. But in actual practice, if one bank pulls out or has rumors of doing so, wouldn't the others? It's 1 big fraternity circle within the banking circle and no one wants to have the bill when the punch bowl is in their hands. From some of the real case studies I have read in the demise of Long Term Capital and Lehman Bro, that always seem to be the case. The old adage "Bankers only lend you the money when they know you don't need it" seems to hold true in most circumstances. I believe bankers are like humans, and so they can exhibit lemming-like behavior, just like the hapless OPMI.

Credit is always available in the good times as long as banks are willing to accept the trade finance/letter of credit etc. Banks make a lot of money from these, don't they? I suspect Noble doesn't have the edge over other commodity firms. If they did, there wouldn't be a need to sell key assets to raise cash I suppose?

Size and decade-long history, are good indicators of successful global player. Noble is the top 10 CTFs globally, with decades of operating history. Noble is competing with other top 10 players for talent, thus it should be safe to assume it is a competent player globally, at least before the recent crisis.

http://www.telegraph.co.uk/finance/commo...aders.html 

If banks will pull the plug, they have done it already, before the right issue, the recent credit financing restructure (more on secured debts), and asset-sales proposal, IMO.

[shadow_walker]

I feel that Noble is facing some difficulty in liquidity - shrinking liquidity headroom and constrained credit line. Banks are trying to lower their exposure to Noble without killing it for now, whose business model depends significantly on revolving credit facilities to finance their working capital cycle. The reduction in the revolving credit facility is significant.

They even have to get a covenant waived. That's why they did the rights issue and are selling off assets. With constrained liquidity, they are forced to scale down their businesses to reduce the working capital requirement rather than what was implied that they made a choice to sacrifice profit for cash. Despite the fall in revenue, Noble still suffers a negative OCF of USD 534 mn in 1H2016 - Off-balance sheet receivables of $200mn that came on-balance sheet.

http://www.thisisnoble.com/images/storie...AFinal.pdf
"Liquidity headroom, being the sum of readily available cash and unutilized committed facilities, was at US$0.8 billion as at 30 June 2016 compared to US$1.9 billion as at 31 March 2016. The decrease in Q2 2016 was primarily due to the reduced size of the new Revolving Credit Facility refinanced in May 2016 compared to the maturing Revolving Credit Facilities."

"In Q2 2016, the increase was primarily due to a net increase in trade receivables, as approximately US$200 million of previously off balance sheet trade receivables in the US came on balance sheet to form part of the asset base in the US borrowing base facility, which closed in May 2016. The remaining changes in working capital were due to fluctuations in commodity prices and the timing of settlement of physical commodity contracts."

http://www.businesstimes.com.sg/companie...after-loss

"Net debt increased to US$3.92 billion by June 30 from US$3.69 billion three months earlier, the company said. Liquidity headroom - its accessible cash plus available committed bank facilities - shrank to US$800 million from US$1.9 billion at the end of the previous quarter. That number needs to be "much higher", according to chief financial officer Paul Jackaman.

"There's been an increased focus on liquidity over profitability," Mr Jackaman said on a conference call after the results.

"It's fair to say that we have accelerated, being very single minded, on moving as fast as we can to continue to deleverage and that has had consequences on results."

Credit Lines

Some credit lines linked to particular commodities, are "constrained", Mr Jackaman said in an interview after the call. The company got a waiver from relevant banks relating to one of the financial covenants in its revolving credit facility and borrowing base facility for the period ended June 30, it said."

[CityFarmer]

@ Mr. shadow_walker

What is your view on the followings?

1) What is the odds of Noble survival, with the current restructuring plan?

2) Will the liquidity issue, be greatly improved by the followings, if materialized?
- right issues - completed
- sales of the Noble Americas Energy Solutions (“NAES”) - ongoing

Thank you

(vested, and looking forward for your insights)

[shadow_walker]

@ Mr. shadow_walker

What is your view on the followings?

1) What is the odds of Noble survival, with the current restructuring plan?

2) Will the liquidity issue, be greatly improved by the followings, if materialized?
- right issues - completed
- sales of the Noble Americas Energy Solutions (“NAES”) - ongoing

Thank you

(vested, and looking forward for your insights)

I don't think I am able to give any insights. If Noble has been another non-commodity/non-financial company, it will have been easy to analyse its credit risk after the rights issue and sales of asset.

Noble's business model is reliant on credit facilities for its working capital, which ultimately boils down to whether the lenders (banks and trade creditors) are willing to continue to lend. It is similar to banks in that it is reliant on its lender's continual confidence in its sustainability and collapse usually takes one of two forms - 1) Bank run 2) Blow-up. For the first, it is likely that banks are already reducing their exposure, hence triggering the rights issue and sales of assets. The question is whether it is sufficient to shore up its lender's confidence. For the second, investor will need access to its trading book to understand its full exposure. Neither which I think any investor will have real insights.

[CityFarmer]

@ Mr. shadow_walker

What is your view on the followings?

1) What is the odds of Noble survival, with the current restructuring plan?

2) Will the liquidity issue, be greatly improved by the followings, if materialized?
- right issues - completed
- sales of the Noble Americas Energy Solutions (“NAES”) - ongoing

Thank you

(vested, and looking forward for your insights)

I don't think I am able to give any insights. If Noble has been another non-commodity/non-financial company, it will have been easy to analyse its credit risk after the rights issue and sales of asset.

Noble's business model is reliant on credit facilities for its working capital, which ultimately boils down to whether the lenders (banks and trade creditors) are willing to continue to lend. It is similar to banks in that it is reliant on its lender's continual confidence in its sustainability and collapse usually takes one of two forms - 1) Bank run 2) Blow-up. For the first, it is likely that banks are already reducing their exposure, hence triggering the rights issue and sales of assets. The question is whether it is sufficient to shore up its lender's confidence. For the second, investor will need access to its trading book to understand its full exposure. Neither which I think any investor will have real insights.

True, there is no way for OPMI to access the trading book. The best OPMIs can do is to estimate base on various indicators. Anyway, thanks for the reply, and highly appreciated.

I shares an relevant article from BLOOMBERG. It is part of my similar story on the buy call.

Noble Group liquidity crunch is 'temporary', Fitch Ratings says
15 Aug 2016 15:51
[SINGAPORE] A liquidity crunch at Noble Group Ltd may prove to be temporary, according to Fitch Ratings Ltd, which said that the Singapore-listed commodity trader will probably generate about US$900 million in the coming months including proceeds from a recent rights issue.

Liquidity will improve as Noble Group gets US$500 million from the rights issue and the rest from working-capital reductions, Fitch Ratings said in a statement on Monday. The crunch of the second quarter won't persist and Noble Group will have sufficient liquidity this quarter, it said.
...
BLOOMBERG

Source: Business Times Breaking News

[CityFarmer]

A different view from another rating agency on Noble's liquidity status in near future.

IMO, the root cause of the liquidity drought, isn't in the income statement, but in the balance sheet. Mr. Yusuf Alireza quit, might due to similar difference in view with Mr. Chairman.

(vested)

Noble Group downgraded by Moody's as liquidity seen pressured

CHICAGO (Aug 16): Noble Group was downgraded two levels by Moody's Investors Service, as the ratings agency said the Singapore-listed commodity trader's liquidity "could come under further pressure over the next 12 months" amid weaker-than- expected profitability.
...
http://www.theedgemarkets.com.sg/sg/arti...-pressured

[getrich]

http://sbr.com.sg/agribusiness/news/are-...ts-failing

Moody's downgraded the stock by two levels.

According to a report by Bloomberg, Noble Group Ltd. was downgraded two levels by Moody's Investors Service. The ratings firm said that the Singapore-listed commodity trader’s liquidity could face further pressure over the next 12 months amid weaker-than-expected profitability.

"Noble has lost more than half its market value over the past year as prices of everything from oil to coal and copper tumbled and its accounting methods came under attack from critics including Iceberg Research," Bloomberg revealed.