THE RISK OF HIGH LEVERAGE AND A PLUNGING ASSET VALUE
Figure 5- Consolidated Balance Sheet
The default risk of the trader is not limited to the renewal to renewal of it trade facilities.
Potential suitors or lenders to the trader must consider:
IV) the risk that a plunging asset value could create insolvency and ii) the risk that the asset value stated by Noble Group Ltd. may be inaccurate or uncertain even before a fall in value.
While the Equity booked value gyrated at a 85% over its traded value per share, figure 5 shows that a drop of just -19% in the $17 billion assets value would render the commodity trader insolvent.
The later assumptions are not only possible and probable, they have been proven recently.
In Q42015 Noble Group Ltd. has sold its remaining 49% stake Noble Agri to Cofco corp, a -44% discount to the $1.34 billion that Noble Group Ltd. was valuing the agricultural unit on its FY2014 balance sheet.
“The company has significant long-dated contracts that are not fully hedgeable and the value of which relies on input assumptions that are not market-observable
We cannot rule out further asset impairment, given the depressed commodity prices.”
– Standard and Poor’s 2016-02-26