Monthly Archives: June 2017

Nothing good out of Noble camp

“Salad Dressing”

On Dec 31th 2016, the coal and gas PnL is up by about $500M with no reason, simultaneously the MTM on Commodity Contracts was also up by the tune of $500M ?!

Negative CFO -900M for Q4 told a different story than their P\L that we can only tell.

In the past we have expressed reservations about the uncertainty surrounding the outcome of Nobles Financials as well as the risk that financial losses would continue.

gative CFO -900M for Q4 tells a different story than their P\L that we can only tell.

To us there should be no excuse for non-performance. Its toleration shows the kind of risk management that Noble had.

In commodity trading, the unfolding of the Tradetocash is plainly and simply the bread and butter.

When the firm is questioned, and it’s unclear from the answers they give how they make the bread plus this firm doesnt show the butter : there is a problem and it should be stopped.

“At Astra Oil Trading N.V, “ASTRA” we had to least produce enough steam for $1.6M (to cover our 8 salaries, office overheads and misc expenses…) before making any profit in our pockets. It was the low-hanging food set by the line manager”.

On day one, I was told my raison d’être: we hire and pay you specifically for one reason, protect the cheese“.

Until December 31th, at 15 to Midnight it was like skating on the thin ice over a lake“.

A First class Operator in Conmodity Trading.

Via http://wp.me/p3k7lL-62i

The negative significance of Noble (來寶集團) Mark-to-Markets Gains on Derivatives and Commodity Contracts

Noble Group at the dusk of an agonising death spiral.

The only reproach that one could do to Iceberg Research is that he didn’t communicate well enough his message so people understand the negative significance of this $3.4B MtM or on what Noble Group (來寶集團) underpins its financial substance: a skeleton.

What is MtM and how a $3.4B MtM would translate into coal hedges)…  

Noble group fraud mtm

noble group enron

Mark-to-market (M-t-M)

To mark-to-market is to calculate the value of a financial instrument (or portfolio of such instruments) at current market rates or prices of the underlying.

http://www.risk.net/definition/mark-market

Example for illustrative purpose:

On 1 Jan 2017: Noble buys 2,000,000 MT for June 2019 delivery at $59/mt. It turns immediatly in the derivatives market and sells the equivalent of 2,000,000 MT of paper contracts. This is the Coal API2 Argus futures contracts.

This is the Coal API2 Argus Futures Contracts.

COAL API2.png

Timeline

1 Jan 2017: Noble has a +MtM of 0 (Contract price is $59 and the Argus Futures is at $59)

1 Feb 2017: The Argus Coal API2 futures is at $64,25. The +MtM on the coal contract is +$10,5M

20 March 2017: The Argus API2 Futures dropped to $59,25/MT The +MtM on the coal contract is +$500K

1 May 2017: The Argus API2 settled at 62,55 and the +MtM on the coal contract is now +$7,1M

Noble Group MtM on Coal contract:

mtm coal noble group.png

At any given time, the 2,000,000 MT of Coal produces a MtM gains between $500K and $11.5 millions.

seanergy-maritime-capesize

Capezize Ship

When Noble announced a first-quarter loss of $130m— it blamed largely on ill-judged coal trades—and it warned that it might not return to profitability until 2019.

Can you better put in context the warning that it might not return to profitability until…

These “Hedging losses” are rather because of a mismatch between the level of profits booked on these contracts and their underlying cash-flows.

In order to produce $3.4B of MtM gains, Noble would have to buy not 2,000,000 MT of coal , as in this example, but book nearly 958 million metric tonsthe equivalent of 6937 Capezize cargoes Richards Bay-Qingdao, China or 5 voyages per week for the next 13 years…

This represents a considerable tonnage even for the largest firms of the industry (Cargill, Rio Tinto, BHP, Vale, Anglo American)  all put together and more than 1.21 year of world coal production*

 

 

the Noble Files 高贵组文件 研究

**According to BP statistical review of word energy 2016, the world coal production was 786.1 million tonnes (2015)…

This time Noble (來寶集團) will work for itself, not for the banks…

Last year we predicate that refinancing Noble (來寶集團) would be a lose-lose deal in which everyone would end up looking bad.

 

“At some points the Banks must get out, must unload the RCF risk with the red pill and it means that Noble will work for the Banks”.

“This is the equity offering of a company with very questionable or no prospects, transferring risks to retail investors”.

In short, this is a lose-lose deal in which everyone ends up looking bad”.

Refinancing Noble: a Lose-Lose Deal

March 16, 2016 

–  the Noble Files 高贵组文件 研究

The only thing we got wrong in 2016 is that some Banks would still accept to refinance the liabilities of Noble (來寶集團) on the back of an equity raising.

The investors have eaten the red poison pill and we simply overestimated their level of sophistication.

Can anybody look back and say it was good to let Noble raise more than 1.2B in equity offering and bonds ?

  • The 750M bond raised is traded at 40c on the dollar.
  • Equity investors who also subscribed to the 500M share rights issue at 0.20/share are now at 0.03…


Success can’t be imposed on this circus.

As of Q1-2017, Noble Group (來寶集團) had $3,4B of marked-to-market fair-value gains on derivatives and commodity contracts.

What does the $3.4B MtM figure represents ?-this MtM is not contracts that can be liquidated to cash.

Given that the Operating loss is created by a mismatch between the level of profits booked on these derivatives and commodity contracts and their underlying expected cash-flows, the real nature of this MtM can be viewed as an expensive liability that Noble (來寶集團) has to roll-out.

Noble (來寶集團) has even pushed back against guidelines in Singapore for disclosing information on its executives’ remuneration.

Perhaps Noble (來寶集團) needs to raise another 2B to pay coming debt retirement (reassure the lenders that they refinance the fair to arrive net equity on a future solvency basis) – as the book doesn’t generate positive cash-flow since 44 months.

It is no longer a working capital shortfall that we observe but the liquidation of a trader  (virtually silent in the physical market)…

Lenders will choose to roll up credit. IF not, they precipitate a restucturing which is told to be not in the interest of the 2020 and 2018 bond holders (FT).

 noble group fate.png

It should be pretty clear.

This time Noble (來寶集團) will work for itself, not for the banks.

On the road show, Noble has asked the permission to decrease its net equity.

It wants to set its own “term sheet” and its covenants to be relaxed, exactly the opposite wanted by the other side.

4 Banks are long with a $1.5B exposure left with this intermediate situation :

 

 

the Noble Files 高贵组文件 研究