Category Archives: Corporate Governance

HK Shell, for Sale !

83290881_XS

  • The performance is far worse than what management wants the market to know.
  • Noble Q1-2018 real loss is
    -US$ 205M.

Noble Group loss 31 march 201.png

Noble real loss is for Q1-2018 is -205M

“Share of profits and losses of joint ventures and associates increased to US$134 million as a result of the increase in fair value of the Group’s investment in Harbour Energy – which has benefitted from an increase in value of their asset portfolio”.

-Q1-2018 MD&A

(…)

What is Harbour Energy ?

What we refer to is US $10.2B pending takeover with a dilutive effect for Noble even if conclusive. What we observe is Noble increasing its fair-value into Harbourin an attempt to completely obfuscate their financial resultsdespite it can’t never pretend to fund a 75 percent equity contribution into Harbour Energy.

http://www.harbourenergy.com/news/press-releases/harbour-energy-proposal-acquire-santos-limited

Noble is very confident about the business model better known as mark-to-infinity.

They’ve shamelessly used the trick in the past when the trader was building-up assets and now as Noble changes its shelf.

The Noble Files 贵族档案


Noble Tries To Remove Website Critical Of Company

“Noble Group apparently has some extra time on its hands – it is now targetting critics of the company claiming “trademark infringement”. Of course, most people will realize this argument is ridiculous but we will let you read it in its full. See below for a takedown notice sent by Noble to WordPress over a blog hosted by a shortseller. WordPress made the right decision and did not remove the content.”

https://www.valuewalk.com/2018/05/noble-group


 

Even their Losses seem constructively fake so why one would give them a free-ride ?

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The Sad Roles of ING, DB and Wildrik de Blank (Mr. NOBLE Treasury)

We all know that Noble & cie several times wiped out their credit and equity depositors. How this time is it different ?

In September 2017 Noble posted a -1.8B losses only 3 months after Wildrik De Blank (Mr. NOBLE Treasury) issued Noble 8.75% 2022 (750M USD). That’s his record.

The lead manager book runner was ING Bank N.V. they made flat fees in this operation regardless of if Noble had or hadn’t any valid business.

The new noble is no different: it’s the same trader with no business except that now they have a plan which is implicitly crafted to ensure Noble can default on perpetuity (…) and they will.

Shell games.

The banks and the management made enormeous fees when Noble built up assets and => spread the losses of the old assets into new assets. This also worked in reverse => when the market unwind Wilfrik de Blank’s financial hoodoo.

 Noble is shifting the empty shells. ING and DB, who are caught participating in the act, will make a 100-150M USD flat fee (more than its current capitalization).

ING Bank NV and Deutsche Bank are defendants Goldilocks Investment Co. vs Noble Group Ltd. HC/OS 480/2018

The Noble Files | 高贵组文件 研究

NOBLE Paper for Paper Plan 2

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)

http://infopub.sgx.com/FileOpen/New%20No…eID=492729

 

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.

Not only this FV on G/L was improperly valued, Noble had also to fund the “ to-arrive equity”.

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

NOBLE Paper for Paper Plan

 

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

Refinancing Noble: a Lose-Lose DealMarch 16, 2016

Currently the trader is worth Minus -$US900M. Which is about the equity+the perpetuals value. The 70% $ US3.5B debt-for-equity Swap would still leave a company of minus $US450-500M equity…

Zero or less than one-fourth of 1 percent (from 2014) will be left to the Noble existing equity shareholders and less than 3% to perpetual holders.

“The Paper for Paper Plan”

If the bondholders say YES, they get coupon paymentsin-kind, Interest to be pay-if-you-can or at the option of the Noble management. Thus Noble instead of cash value, is proposing to pay the paper with more paper. Noble Restructure plan allows Noble to default perpetually.

If the bondholders say NO, they can aspire to a recovery of between 45-55c on the dollar, cash. Bonds are actually a little above that.

The deal is an ASYMMETRY for the management.

  • If the company (that they bankrupted) ‘goes into liquidation’, they 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 20% stake in the reformed entity, are absolved from criminal prosecutions perpetuating the siphoning with the next-to-become-losers…


To sum up they win, you lose.

the Noble Files

高贵组文件 研究

Noble Americas Corp failed and it’s wonderful

Noble Americas Corp failed and it’s wonderful because we like to see awfully bad people fail.

For the records they were given a blank card and what they did with it was roulette “double the stakes or quit” losing million dollars in negative cash flows per day* depending on how you read  Noble’s torture of its operating income from supply chain and  non-cash mark-to-market unrealised observable positions or its (bogusphysical turnover.

STAMFORD — Commodities trader Noble Group, which has offices at 107 Elm St. in Stamford, Conn., plans to lay off 84 Stamford-based employees by Dec. 31, 2017.

The layoff notice was received last Friday by the state Department of Labor. Affected positions at Noble Americas Corp.’s downtown offices, at 107 Elm St., include accountants, analysts, managers, senior vice presidents and traders. The cuts are scheduled to be made by Dec. 31.

If you want to know the real story of Noble Group, it is pretty simple :  in trading A 3rd or a 2nd won’t make it. It’s not enough. Vitol doesn’t re-hire thirds-traders or failed VPs. (Got to get everything right and 10/10), or the market will grind you down to the ground, it will.

Noble Americas Corp failed and it’s wonderful.

Merry Christmas.

the Noble Files 高贵组文件 研究

The burden of Karma is heavy as Noble crosses the gates of death.

Noble Group has the symptoms of schizophrenia. Their delusion and demise were never “their” fault or caused by the actions of “their” traders.

Caught in-between and dancing on losses, the high rollers have painted it as because of : “liquidity constraint impacting trading and earnings generation”. For Noble Group “the problem” must be the exact solution, they have punted for working capital everywhere from the MD&A to the Press/Investor Communication and Strategic Review…

The financial statements* for the six months ending on 30 June 2017 eloquently sums up the financial substance of Noble Group:

  • Noble presents itself as a  $2B net equity company with an $1,45 MtM unaudited Gains on Derivatives company*
  • The trader has -$763 million negative OCF with a net debt increased by nearly $1B to $3.81B.

* unaudited.

The Energy Segment accounts for 90% of Noble Revenues in 1H-2017.

Noble Group Business

Noble Group Limited Revenues by Segment, 1H-2017

The Energy Segment traded at a loss of $226 million during 1H-2017 (excluding financing costs and salaries).

That’s more than -$1.25 million per business day… Monday to Friday but the business is run smoothly. Of course no.

But in the world of Noble shortlisters rush on a “bargain” 🙂

.

“Sale of Global Oil Liquids Sales process commenced with shortlist of bidders–bids expected in Q3 2017”

-Strategic Review Update–26 July 2017

Noble nasty.png

 

Investor Presentation Q2-2017 P.6

Out of Control

The Non-Performance of Global Oil Liquids should not be that shocking knowing the “Book now, think later” at the company. It lacks the management to impart performance.

Noble had two or three large take-of-pay deals in the U.S but the wind has changed as it always does in the physical energy markets.

The burden of Karma is heavy as Noble crosses the gates of death:

The hostile work environment includes daily vulgar and disgusting comments from male employees about vaginas, sex, male genitalia, and verbally abusive language using the word ‘f—‘ explicitly. constant abuse.”*

During 2012-2016, at the office in Stamford, Plaintiff’s seat was next to the gasoline traders which includes video conference cameras connecting with London and Houston offices.

The commentary back and forth on the Stamford desk for everybody within earshot to hear, frequently became vulgar and disgusting. This created a hostile work environment.

*Ramos V Noble Americas Corporation.

It is the last tango act of an unprincipled trader-assaillant.

Noble did the financial engineering for years and years and then the showgame broke. The typical assumption of a 40% recovery rate may indeed be too optimistic.

PwC has signed Noble’s Financial Statements but performance has inevitably caught up the accounting gimmicks.

Noble Group has generated negative cash-flows from the operations to the tune of

-$1600M in 2014
-$600M in 2015
-$900M in 2016,
-330M for Q-1 2017

and -433M for Q2-2017

A Toxic Legacy

Net fair value gains now stands at $1.455 billion as of end-Jun 17. 

fairtoarrive net equity of $2B* is still rather delusional for a company not producing any plus-value -Noble is losing operating cashflows at a rate between -3.5 and -$6.5M per business day in the recent quarters.

*unaudited financial statements.

Noble’s position is irreparably compromised. 

Noble group has no intrinsic value (by Discounted Cash-Flows).

The firm offers no viable future for patient capital.

Their leverage futures-physical trading model has too much impediments to break-even.


The Noble Files 贵族档案

 

The War on Women

You would think that the most educated people are the most “Noble”.

These 56 pages are a Gold mine of abuse.

Wendy Ramos is head of chartering in the well-known Stamford trading outfit.

She is referred as the oldest employee. The lawsuit states that Ramos was treated differently than at least five male counterparts in terms of pay, bonus and renumeration.

The hostile work environment includes daily vulgar and disgusting comments from male employees about vaginas, sex, male genitalia, and verbally abusive language using the word ‘f—‘ explicitly. constant abuse.”

A Day on the trade floor.

During 2012-2016, at the office in Stamford, Plaintiff’s seat was next to the gasoline traders which includes video conference cameras connecting with London and Houston offices.

The commentary back and forth on the Stamford desk for everybody within
earshot to hear, frequently became vulgar and disgusting. This created a hostile work environment.

It was a constant back and forth across the Stamford desk of sexual innuendo and inappropriate commentary.

For example, on October 1, 2015, there was a discussion around the smell of fish and a women’s body that was extensive.

This happened on the trading floor in an open space. Sushant [Sushant Koduru] left sushi on EL’s (a female employee) desk. EL said to Sushant and the other men that she didn’t want the sushi.

In response, Sudeep  says to Dmitri [head gasoline trader], “EL is offering out her sushi to everyone,” with intonation of a sexual nature regarding her vagina.

EL encourages the behavior an repliesand laughs, “Who wants my fish? Everyone wants my fish!”

The men around me were giggling among themselves.

Then EL comments, “It’s very fresh!” To which Sushant smiled and replied, “I’m sure! Koto Approved.” 🙂

HR Policy “D cups”

On or about, 2015, Plaintiff was told that Jeff Frase (CEO) and

Mike Kerrigan-Human Resources had a meeting whereby they were discussing restructuring (firing) staff.

Plaintiff was told that Jeff said that they had to keep Blair Shrewsbury, a young intern, because she was the only “D” cups on the floor, whereby Jeff and many others laughed about it, including the HR executive.

blanc

Incompetence & Arrogance

The Lawsuit alleged that James McNichol  and his team lost Noble well over 85 million dollars in the year he left Noble’s employment.

James McNichol came to Noble from Trafigura where he had been accused of being the trader behind a deal that unlawfully disposed of oil waste slops in Nigeria that ultimately caused serious illness of multiple people who came in contact with the disposed slops.

Plaintiff’s first experience with James was during a “Team Building” meeting held in

Barcelona Spain during October 9 11, 2009. Plaintiff was asked to attend and give apresentation relating to the Chartering desk. It was clear from the start of meeting that James had his own agenda for the Oil Group.

blanc

Managing the company money.

The entire trading team at the time was in Barcelona where on the first night Plaintiff went to dinner with the group and then to an early night in.

The next day during the Team Building presentations several men were missing. As they showed up in the afternoon hours of the day, the rumor was that the men were not present because they were hung over. As the day progressed, it was said through conversations that these men were out all night at a strip club. After the event, James submitted the “expense” to Ted for reimbursement.

If you run into trouble, just tell a lie to the customer.

blanc

On or about, 2009, on information and belief, James McNichol told the London operations manager, Zelda Harina, that she needed to convince the inspectors to lie about quality outcomes on cargoes.

James wanted her to do this to make more money. She refused to urge the inspectors to lie and she ultimately quit because she would not do what he asked.

During this time at Noble, on information and belief, James proceeded to make questionable trading decisions that were losing the Oil desk millions of dollars.

blanc

 Book now… think later

For example, he took on overpriced storage, taking on multiple time charterer ships for Gas and Diesel without consent from Ted.

The spreadsheet below that shows that Noble at that time had taken approximately 670,000 MT for floating storage versus Vitol (the largest trader in theworld) was 2nd with 300,000 MT than the total trading market.

mogas on water

blanc

Plaintiff sent this spreadsheet to Ted and asked him to do something about James’ injurious actions.

Not only was he hostile to her, now his behaviors were damaging to the company’s bottom line.

However, nothing was done.

blanc

At the end, the unsold cargoes, and empty storage finally caught up to the oil traders, and ultimately James and his team lost Noble well over 85 million dollars in the year he left Noble’s employment.

Can you understand why Noble Group is in a liquidating death spiral ?

Can you understand better Noble Group will soon cease to exist, evidently somebody messed-up big time.

The Noble Files 高贵组文件 研究

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

Banks Chasing the”tails” in Hong Kong -The Noble Group (來寶集團)

Noble Group (來寶集團) has no or few audited flow supporting their 48B$ sales of commodities.

According to the industry, their turnover, by any account, would appear as vastly overstated.

At an average of 10 days shipment and with cost of the goods sold of $48.58B FY16, the average inventory in transit recorded by Noble would have to be at least $1.256B. The the audited number was only $2.6M FY16.

FY2016 The average transit time of Noble was now 0,019 days, either implying that Noble has used scuds to ship the company  or that the corporation had a COGS inflated by 10 to 15 times in 2016.

Noble Group inventory in-transit

Noble Group Ltd. Financial Statements 31 December 2016

As of May 2017 the company had YTD losses (330) Millions in operating cash-flows but self-assessed itself with a net equity of $3.849B while of this net equity is tied to the fair value gains of its derivative and long-term commodity contracts.

Iceberg Research, the research firm has challenged Noble Group (來寶集團) over mark-to-market accounting of these contracts.

Bankers know that the last 24 months have been punctuated by a series of catastrophes, credit downgrades and bizarre resignations at Noble.

CEO ex-GS Alireza, Mr. Elman and Noble Group’s chief financial officer Robert van der Zalmin in particular who has stepped down from his position after taking a leave of absence for “health reasons”.

Traders (smart money) have also left at the right time. (Fabrizio,Steve Bader, Paolo B, Ted, Doug M..)

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.

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

The 2,000,000 MT of Coal produces a MtM gains between $500K and $11.5 millions.

seanergy-maritime-capesize

Capezize Ship

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

This represents a considerable tonnage even for the largest firms of the industry (Cargill, Rio Tinto, BHP, Vale, Anglo American) put all together.

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

An inevitable conclusion is that Noble uses a mountain of derivatives to maintain its MtM coal pile or … something else

Back-of-the-envelope calculations suggest that the $3.4B MtM mark used by Noble Group(來寶集團)  translates to coal hedges at 479 USD/MT– The Argus APi2 CIF Rotterdam futures in the $60s/mt.

So…. Accounting fraud …. ?

Won’t  be the first time…

These days Noble is looking to refinance a $3.849B net equity. which has more the financial substance of a “Fair-value to-arrive equity” (sic)

This happens at a moment when Noble has just screwed up both its recent fixed income investors and shareholders.

The thing that frightens banks the most is not having a good risk management process in place because it opens the possibility of financial losses and frauds. A trader with no risk management is like playing roulette; double or quits.

Fraud is the worst nightmare for any bank specialized in commodity lending, but some will always chasing the“tails” in Hong Kong no matter what.

the Noble Files 高贵组文件 研究