Those who take risks must be exposed to the losses that come from them. The restructure of Noble is an infringement of this principle.
- If the company (that they bankrupted) ‘goes into liquidation’, the management pocketed fees, going away with millions in salaries & bonuses.
- If the company does not go in liquidation, the failed management and its failed VPs also end up winning a ~15% stake in the reformed entity, are absolved from criminal prosecutions perpetuating the siphoning with the next-to-become-losers…
- Noble’s 6% Perpetual securities with a principal amount of $400m will be reduced to $25M (a 93,75% haircut) .
The new notes allow Noble to trigger its Perennial Default.
- “Concurrent with the restructuring, the Existing Perpetual Capital Securities holders will be offered the opportunity to voluntarily exchange the Existing Perpetual Capital Securities into a new US$25 million 2.5% non-accumulative pay-if-you-can perpetual capital security instrument issued by New Noble (“New Perpetual Capital Securities”)
(“New Perpetual Capital Securities”) Non-accumulative ? PIK, pay-if-you-can ?
Current shareholders will get a 10% of the ‘New Noble’ (90% dilution)
More importantly what is the standard of probity of Noble and its Financial Advisors PTJ Partners, Comprador, Moelis ?
As of Q1-2017, Noble Group (來寶集團) had a frothy $3,4B of marked-to-market fair-value gains on derivatives and commodity contracts.
As we theorized, Noble’s operating loss was created by the 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 could be viewed as an expensive liability that Noble (來寶集團) had to carry.
The backbone of Noble Group’s net equity represented future gains (P/L) on commodity contracts, comprising more than 102% of Noble Group’s equity, e.g what Noble Group was margining to get trade loans.
Did Noble even validated how they marked their curves, like against the brokers curves Ginga, Tradition, Sunguard ? Else how did they justified their MtM P/L ?
Noble said yes, but thecnically, no independant third-party has been able to verify the gains on the contracts.
In fact even PwC gave an assurance review, but hasn’t worked directly with the contract, Noble arguing the terms were “highly confidential” and disclosing would hurt its competitvity.
It’s on what Noble borrowed from the Banks HSBC, ING and Deutsche Bank.
Predictably it’s what they did.
First they did a ‘discounted’ $500m rights issue, which was said ‘necessary’ to deal with what Noble called a “liquidity crunch” after then creditors and banks reduced their lines.
Then came a $750m 8.750% bond issue sold to the public in March of this year to support the “Fair-value-to-arrive equity”.
Most of Noble (if not all) tangible assets and offtakes have also been sold below the reported BV … and Noble Group, despite all its backstops, has been forced to realize a loss of nearly $4.99B for 2017.
Now finally they had to restructure ?
They are switching entities, leaving current bagholders with claims on an empty shell.
Noble group floats that post restructuring “New Noble” could be listed on the SGX, a wrong, highly uncertain and legally-challenged assertion.
Noble believes the proposed financial restructuring also sets a firm foundation in creating options for future strategic alliances.
What kind of clients or investors will want to seal business deals or only be associated with these characters in the future ?
The Noble Files 贵族档案