Triterras: a commodity- “fintech” fling-flang

Triterras describes itself as a trade fintech. It operates Kratos, a blockchain which connect traders and lenders online. It looks “very 2017“.

There are many of these “fintechs” run by trade finance evangelists, by “Ex- of something ” waiting for their “next-move”.

99% of them are cost-centres: they cannot make their costs.

Triterras is thus not very unique, its project promoters run out of cash without the need to expose their scheme.

Across many years its promoter failed via its brainchild Rhodium Resources have cumulated an impressive a list of creditors with –$700M of claims.

a winner

Reading across this report we found that money is already missing or transactions have no simply no financial commercial basis.

-Most of the volume conducted on is Kratos between the companies linked to Triterras directors Srinivas Koneru and R. Maurer.

Koneru is chairman and chief executive of Triterras, as well as the founder and CEO of Singapore-based commodities trader Rhodium.

Maurer is chief executive of Netfin, the special purpose vehicle that acquired Triterras in November.

PHASE 2’S REPORT ALLEGES THAT RHODIUM AND LONGVIEW – ALONG WITH MULTIPLE SUBSIDIARIES – WERE INVOLVED IN 64% OF KRATOS TRANSACTIONS UP TO AND INCLUDING AUGUST.

Now what ?

KPMG LLP resigned as the company’s independant accountant on January 20, 2021.

How many times you had a chance to find a fraud, an ugly blockchain or both … but how many times these frauds were listed ?

Probably never.

Valuation : Target is 8.9C on the dollar. The Implied downside is -91%

Entering a Short position

Welcome to the investment center.

Noble Group’s New $207 Million Loss

Noble Group’s Plans Come Unstuck With New $207 Million Loss
By Annie Lee and Jack Farchy

Noble Group Holdings Ltd., the embattled commodity trader which emerged from a bruising restructuring just 18 months ago, has been forced to rewrite its plans after suffering a hefty first-quarter loss as the
coronavirus pandemic roiled markets.

The company — which remains unlisted and the subject of an investigation by Singaporean authorities — posted a
$206.8 million loss in the three months ended March 31. That follows a $56.3 million loss in 2019, its first full-year results after a mammoth debt-for-equity restructuring.

The losses underscore the challenges Noble faces as it seeks to reinvent itself following years of turmoil since being
catapulted into crisis in 2015 amid questions about its accounting and sinking commodity prices. The company eventually completed a restructuring that handed control to hedge-fund creditors, though plans for the new
Noble to be relisted in Singapore were scuppered after regulators wouldn’t allow it to sell shares to the public.

The first quarter “was not a very good one for Noble,” Jacques Erni, who joined as chief financial officer in March,
told investors on a call. The accounts valued the company’s equity at just $6 million at the end of March, down from $315 million just after the restructuring at the end of 2018.

The company said the coronavirus adversely impacted markets and commodity prices through the first quarter and it expects disruption in global supply chains to continue through to at least the third quarter.

It recorded a provision of $100 million after reevaluating its investment in Harbour Energy amid significant volatility in the oil sector. The company paid a $39 million arbitration award to Yancoal.

The Noble Files 贵族档案

Fraud and Bribery probe into Noble. “I was cheated” says Korean biggest utility.

Noble Resources International Pte. Ltd. and Terracom investee at heart of a cheating  and bribery scandal.
▪︎Using $ to make offspec cargoes onspec or change certain parameters to the exact numbers they want. unlawful.

The Noble Files 贵族档案

Aussie coal analysis scandal triggers Korean power ban

Liam WalshReporter

May 13, 2020 – 10.45am

A Korean power utility is banning Australian laboratory giant ALS from work on coal shipments, marking financial fallout from a fake-analysis scandal.Korea South-East Power, one of the subsidiaries of the NYSE-listed Korea Electric Power Corporation, put Brisbane-based ALS on a blacklist in two bidding documents this month.

Analysis results for coal used in power stations are under the microscope.  Getty

The bids are for shipments of 290,000 metric tons to 310,000 tonnes of coal. “ALS Limited … is not allowed as an international independent inspection agency,” say the bid documents.

ALS was not banned in previous bidding documents viewed by The Australian Financial Review.

The moves follow ALS in April telling the market its Australian coal unit had “manually amended without justification” between 45 per cent and 50 per cent of final certificates since 2007. All the changes boosted the quality of the coal, and ALS is one of the major players in the Australian export sector.

ALS, which said an internal investigation found no other wrongdoing in other divisions, has since removed a backdoor in processes that allowed changes in the coal certification unit.

An ALS spokesman said it had not received any formal communication from Korea South-East Power. But he said control checks since the investigation had been carried out on more than 650 certificates “to ensure there is direct correlation with all … test data”.

It has also taken its findings to the NSW police because of fears a serious offence had occurred.

“Investigations into this matter are continuing,” a police spokesperson said.

The Financial Review exclusively revealed the scandal in February, after finding court documents alleging ALS had been involved in tampering results.

A former senior manager of Queensland miner TerraCom had made allegations of fraud in a workplace dismissal lawsuit.

The manager alleged TerraCom had been using ALS to falsify results for exports of more than a dozen coal shipments to China, Korea and Japan. TerraCom has denied the allegations entirely and said “to suggest TerraCom was involved in an international conspiracy to undertake false testing is ludicrous”.

No customers had raised any quality control issues, TerraCom also said.

Among the export certificates filed in the legal dispute include details of a $10 million, 146,938 ton shipment from TerraCom in May 2019 with Korea South-East Power marked as the end user. The documents alleged the moisture content had been artificially improved from 15.9 per cent to 15 per cent, between initial reports and final certificates.

The net calorific content, measuring the energy thrown off when burned in power stations, had been allegedly falsely boosted from 5398 kilocalories per kilogram to 5495 kcal/kg.

The shipper was marked as Noble Resources International, part of the Singapore-based Noble commodities trading outfit. The former manager’s lawsuit alleged Noble was involved in paying bribes so customers did not raise the alarm. Noble has declined to comment.

Korea Electric Power Corporation has referred questions to its subsidiaries, and Korea South-East Power has not responded to multiple queries.

The action against ALS in the power company’s tender documents comes after industry sources maintained that falsification was “endemic” across the sector and labs changed results to keep contracts with miners.

Court documents filed by TerraCom’s former manager also said Geneva-based testing outfit SGS had falsified results, but the laboratory business dismissed the allegation after a “technical review”.

Other major testing companies including Intertek and Bureau Veritas have not answered queries. Industry umbrella organisation the TIC (Testing, Inspection and Certification) Council has referred queries back to individual companies, saying it was the “first time” it had heard of such a problem.

Noble Group Commodity Trading was a fraud. How Did E&Y allow this ? and what the Banks discreetly do.

If you are a so-called parent company – you likely have some subsidiaries in your books. These subsidiaries can be either qualified as;

• an Entity with majority stake and control (100% – 50% ownership),
• an Associate with significant control (50 – 20%) or
• as a long-term investment (20% – 0%).

For instance, Noble Group held a 13% stake in a listed Australian coal miner named Yancoal. It classified the company as an “Associate” on its balance sheet despite failing to meet the 20% ownership threshold.

Noble Group defended itself by stating it has “significant influence” over its subsidiary. However, with 77% of the remaining Yancoal stocks in the hands of Chinese state-owned company Yankuang without any clear management or supply chain connections – this became a rather questionable assumption.

As such, Noble Group falsely treated the value of Yancoal under a self-estimated cost-basis rather than on the market-implied value.

In Noble Group’s books, the self-estimated carrying value of Yancoal was $614m 2014 at a lousy 38x earnings multiple.

The 13% stake in ASX-listed Yancoal had a market value of only $11m… This meant that the carrying value is 55x the market cap of the 13% stake Yancoal.

How did E&Y, the auditors, allow this?

EY, well aware of the issues, wrote a note in the annual report to avoid future legal liabilities.

“At initial recognition, the investment in Yancoal was measured at fair value estimated based on a discounted cash flow model. Determining the value for this investment required the Group to make certain estimates and assumptions on expected sales and production volume, future sale prices, expected future costs and expenses. Actual outcomes could differ from these estimates and assumptions.”

-Noble Group 2012 annual report

However in the 2013 annual report, EY wrote:

“$577M “accounting adjustment” between the carrying value and “the group’s share of net assets of the associate”.

Equity Bubble Falloff

There was indeed more to be seen. Iceberg Research found USD 212m of mistreated operational improvements in Noble’s Agri subsidiary with key drivers being an unexplained increase in deferred tax assets with unexplained decrease in depreciation, holding subsidized selling, administrative and operating expenses (“SAO”) with an unexplained decrease in financing costs.

Noble Group listed-equity value was bogus.

As the new information about the company revealing its true nature was disseminated to the market it was gradually written-off from -50% to -99%…

For a few banks however, it was an alert to save their outstanding trade finance facilities collateral from defaulting.

With S&P still showing an inflated single-B rating, the banks HSBC, ING N.V, Morgan Stanley and Societe Generale felt confident in raising USD 750 million carrying a coupon of 8.750% Mar ’22 just in time ahead of troubling Q1 2017 results.

Noble 8.75% issued the 2022 (750M USD) and timed a -1.8B loss result only one quarter after…

Post-results, the bond was downgraded to absolute junk-status CCC, wiping out almost its entire value…

In March 18, Noble Group could not make the 8.75% coupon payment on the said bond and defaulted on the 2018 $394M bond.

The head of ING commodity finance would later postured “our bank suffered no losses”.

September 2018: Noble Group is -902M under, –1.017B negative equity if we account the new non-cash gains they took on Harbour…

In Noble Group, both the Assets and Profits are inflated.

“In the U.S, it is no different. Noble Americas Corp, Frase & Co were making a profit… and another unit was writing a loss ?! They seriously underestimated/misstated the financing costs of their P&L to maintain the borrowing base intact… “

As such, it’s bogus. The banks financing Noble are only tourists.

For example, in the mind of a Managing Director of the Shipping at Noble his division was making a profit on forward contracts (it’s the group trading “shipping at a loss”). Terrific company !

Please feel free to comment below.

The Noble Files 贵族档案

The Strange Act of ING in the Noble Circus. Q&A

Bizarre ING their case: No business but keeps restructuring… Proceeding without forensic investigation and while the client is under a police investigation. “But lets do it”.

Person A “…Q. so why is ING so hardup on supporting the Noble bandwagon? Surely, there are things going on behind the scenes.”

Person B “-Because they are losers.” like in anyone in that situation at some point who would be forced to do it (avoid the liquidation) saving their own skin.

If not, they could lose $400M”.

Human nature is complex, but predictable;

the good / evil .. .empathetic/ psychotic.. … …. peace / war……… ….moral /amoral....

ING/ the Anthony Van Vliet

Person A Q.”Isn’t it strange and suspicious at least that ING has proceeded so quickly into the early beginnings of this investigation and without a full forensic audit of Noble before moving into December 24th Christmas “..Don’t understand why they would publicize this.. the singapore police is investigating”.

Person B “Yeah saw that”

” the golden rule should be silence…”

But I’m not in their shoes.

Just know that Goldman Sachs came and cut em off.

“GS made a ton of millions when betting against Noble and the banks on the other side of the Trade.”

Person A ” The authorities say the simulated financial statements show that the net asset value (NAV) of New Noble as at Dec 31, 2017, could be adjusted downwards by about 40%, and that the NAV as at Mar 31, 2018 could be adjusted downwards by about 45%.

These adjustments would be in addition to the write-downs of more than US$2 billion ($2.7 billion) already made by Noble in 2017.

Arising from investigations by CAD and MAS, the authorities point out that there could be even further reductions in New Noble’s NAV that extend beyond the potential non-compliances with accounting standards highlighted by ACRA.”

Person B ” more is coming”.

Interesting enough, they keep restructuring and equity but no word about the business.

Person A: and this is bad, the SG authorities, at least, deserve credit. By not allowing them to re-list on the exchange, they did right.

Person B : Do not lose faith in Singapore and the Authorities.

Justice will prevail.

Person A: Q. Would the banks acting in the perephery of Noble also be part of the Investigation ?

Person B –Absolutely and the on-going existence of Noble as a private entity could be proven a “Forward liability”.

The Noble Files 贵族档案

Noble streams of defaults optionality inside the Noble-Singapore Circus

The Noble Paper for Paper Debt-for-Equity swap will continue to puzzle the WallStreeters and a plethora of Professors in finance for the years to come.

Inside the Noble-Singapore Circus.

The FT reported that an ex-MS-IB will be the leading captain of the “Noble 4 ship”(…)

IAN PORTER (who turned to be the Brainmaster of the “Noble 4” plan crafted to ensure Noble can default on perpetuity) is shortlisted to become the new “new” NOBLE 4 CEO.
By engineering Noble a Perennial Default, Ian Porter has created a precedent in the world of Asian Finance and commodity trading. A precedent, because where did exactly come at from the bulk of these debts ?

(1) From Artificially inflated PnL “assumptions”, and

(2) exagerated asset valuations for the most part.

(read also The Sad Roles of ING, DB and (Mr. NOBLE Treasury)

$850,000,000 gone in the fire.

What is the difference between Clowns and Jokers. The former entertain. They make their living by doing silly things making their audience laugh while jokers on the other hand do jesters, at the expense of other people. ($$$).

• Noble burnt more than $US 1,650,000 per diem, monday to friday in 3Q-2018.
• Noble Group’s $850,000,000 2020 noteholders were notified of an event of default on October 28th.
• In the absence of paying its bondholders with REAL CASH, (it does NOT produce any) the SGX-Singapore trader who is seeking restructuring protection in the UK and U.S juridictions is left with two streams of defaults optionality:

• Noble 4 will:

1) Default

Or

2) The pay its debtors with always more re-issued IOUs notes...

BUT it is a big mistake to assume that the protognists can continue to swap their liabilities into equity paper ad infinitum…

Under the Singaporean law, shareholders or creditors can apply to wind up a company with the goal of collecting and selling assets in order to pay outstanding debt, expenses or costs etc.

Like all its predecessors, Noble 4 is deemed to fail.

The company is systemically flawed. Its future existence highly uncertain.

(Bonus Read)

“Shipping is running just normal, 😉 its the Trading who ships at a Loss…! “

The Noble Files 贵族档案

NOBLE-A grotesque restructuring. Vote NO

FIRST. It would be incongruous and extremely frothy for Noble to continue on an ongoing basis after the cascade of events. We do not see the contours of a strategy or any edge that the entity would have in 2019 or that Noble (2007-2017) had other than a flawed and very misconstrued “commodity rotation” e.g spreading the losses of one division to another and back and forth).

SECONDLY, because agents, a.k.a Noble Group Management, provided an illusion of profits by camouflaging the properties of steady income and are/were compensated yearly for losses that occurred/will occur with a much longer frequency.

THIRDLY, for all other good reasons and mostly because this is absolutely grotesque.

WHERE, in the world, can a company restructure a Fraud ?

VOTE NO!

The incoherences Between PLATTS and S&P Global Regarding Noble Group

PLATTS, the energy and commodity pricing agency of S&P GLOBAL is said to re-integrate the bids, offers and transactions of Noble Resources International Pte Ltd (Noble Group Affiliate) in the ASIA market on close (MOC).

“Noble Resources International Pte Ltd has advised S&P Global Platts that it would like to participate in the Platts Asia Market on Close assessment processes for Asia gasoil paper. Platts has reviewed Noble Resources International Pte Ltd and will consider information from Noble Resources International Pte Ltd in the Asia assessment processes for Asia gasoil paper, subject at all times in adherence with Platts editorial standards. Platts will publish all relevant information from Noble Resources International Pte Ltd accordingly”.

Well at least wait for a credit improvement of S&P Global Ratings from ‘D’ before reintegrating Noble Group into the market on close (MOC).

It wouldn’t be too much asked to also use common sense giving the chain of events with that corporate in the recent months: Noble has a net worth -1B USD, generating 150M losses per quarter is probably the most extreme case of a counterparty IN THE PLATTS MOC, a fact been flagged to Platts few times …

“Platts considers bids, offers and transactions by all credible and creditworthy parties in its assessment processes.”

But for Platts, a bankrupted trader can stay “credible and creditworthy”, as long as they can prove that they can open the Letter of Credit from a Bank but here lies the rub: Platts doesn’t require seeing a copy of the said L\C… only a communication (letter, email or by phone call)” … (SIC)

Summary: It’s at the entire risk on the counterparty that deals with them if Noble wacks a window delivery.

The Noble Files 贵族档案

HK Shell, for Sale !

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

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 Harbour– in an attempt to completely obfuscate their financial results– despite 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 ?

“Shipping is running just normal, 😉 its the Trading who ships at a Loss…! “

MICHAEL NAGLER (Mr. Noble Shipping Fees $$$$) 

Embattled Noble Group has no plans to exit shipowning and says time charters are the way forward- Noble says sale of kamsarmaxes reflects new strategy — not exit

---

The point is this is not and this never was their money.

Noble Chartering is charging a fixed FEE to => Noble Resources SA trading 10-12 million tons* at a loss=> on behalf of Noble Group Limited (Noble), the parent company => laying off their losses on the credit investors & shareholders.

See how the shipping strategy works out without trading taking losses and hundred of million in credit lines…. Spin off noble chartering. DO IT !

SPIN OFF and see if you can make CASH ! Alone without credit lines and a trading company totally taking the losses for the shipping to break even.

The Noble Files 贵族档案

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 has “normal operations”

Here’s an example of a news, not important but probably the most inusitate piece written.

A Noble MD states that Noble Group Shipping division, performs quarter after quarter, despite parent company’s huge downturn…oh well it’s the trading part who ships at a loss ! Michael Nagler tells us that Noble incapacity is because of others divisions.

This mental-model is flawed. Indeed we know that Noble has kept shipping the coal at a loss.

“It has been “full performance all the way through” at Noble Chartering despite the parent company’s huge crisis and uncertain future, Noble Chartering CEO Michael Nagler tells ShippingWatch. The number of employees and ships has been reduced significantly over the past four years*.

Commodity trader Noble Group has gone through a steep downturn in the past three years, and meanwhile, the number of ships and employees at subsidiary Noble Chartering has been reduced significantly. But even though Singapore-based Noble Group is currently struggling to settle a comprehensive restructuring at a time when the founder and majority shareholder has pulled out, and while the parent company has been hit by several lawsuits, the dry bulk business itself is running “normally,” Noble Chartering CEO Michael Nagler tells ShippingWatch”.

It’s even truer in life than in a bad series script. The big picture is that those taking risk at noble have not been exposed to their losses. At any other trading co. Nagler is FIRED. Any other co.

.

https://shippingwatch.com/carriers/Bulk/article10486224.ece.

The Noble Files 贵族档案

.

*Reported volume by Noble Management and turnover growth are an extremely contentious issue.

More people doubt the revenues of Noble Group.

Noble Not Paying: The ISDA must now get its act together.

ISDA refused to maintain market integrity, dragging their heels on the CDS which was absurd, funny how they didn’t on Codere.

Noble is on track to not repay its first bond payment. We know now that it doesn’t intend to repay the $375 million bond due this tuesday.
So why does Noble simply doesn’t pay ?
Noble says it would be for the benefits of all its shareholders.
What benefits ? getting 1/10 of the ‘new-noble’.

What happens next if Noble defaults ? Legal procedures will start.

Inversely the trustees need only 1/4 of the bondholders support to liquidate Noble Group.

S&P Global Ratings cut Noble’s credit score to D, a level signifying default after the Singapore trader refused to pay principal and interest payments on its U.S dollar notes.

• Noble says it will not make payments despite being granted a 30-days grace period.

.

The ISDA must now get its act together.

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 payments–in-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 (bogus) physical 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

STAR ???? Hello Star

Noble’s Star Gasoline Trader Sinenko Said to Join Gunvor

Gunvor Group Ltd. has wooed Noble Group Ltd.’s star gasoline trader to join its expanding U.S. operations as an exodus from the struggling Asian trading house continues amid asset sales and a debt restructuring.

Dmitri Sinenko, one of Noble’s top performing oil traders, has agreed to join Gunvor’s U.S. operations… -Bloomberg

 

 

There is a few myths and misconceptions in the presser starting by STAR ??? Hello star.

On the cash-flows statement basis the U.S pipeline trade is absolutely what has killed any ray of hope for Noble of breakeven and paying back the borrowing base. https://noblegroupresearch.wordpress.com/?s=oil+liquids

 

The ‘Co-Stars’

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In our book, the co-stars Dmitri  https://noblegroupresearch.wordpress.com/tag/dmitri/ and Jeffrey “Chief Relaxation Officer ” VICE president and CO-CEO Frase, simply put, are synonym of two high rollers overheads.

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Noble Americas Oil Liquids was Noble’s last hope and they have bet everything on the same horse.

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 how Noble torture its operating income from supply chain and  non-cash mark-to-market unrealised observable positions or its (bogus) physical turnover.

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If you want to know the real story of Noble Group, it is pretty simple:  in trading you can’t be just a second or a third, it cannot and won’t work.

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“Even with massive refineries shutdown of a historical proportion in the wake of Harvey flooding, Dmitri has not break-even, was losing Noble Americas Corp. half a million a day on his pipelines trades.”

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A 3rd or a 2nd won’t make it. It’s not enough. You need to get everything right and 10/10, or the market will grind you down to the ground. Don’t hire bums.

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the Noble Files 高贵组文件 研究

Noble’s “Reverse Working-Capital”…

All traders share an aspiration to borrow OPM and most of them, one day, will trade with money they aren’t eligible. Noble fell very young in the powder pot.

At one point in the time, Noble Group certainly received liquidity that they didn’t qualify for–Now the same banks are scrambling to unwind Noble’s balance sheet.

From FT

“Noble said the lower than expected sale price for its gas and power assets reflected the conversion of working capital into cash and a revaluation of trading positions due to “market volatility”.

“Mercuria had paid $102m for the business and deposited a further $83m in an escrow account”. 

“That figure is much less than the $261m Noble estimated it would be paid for the business last month when it asked shareholders to approve the sale”.

• The conversion of working capital to cash assets is the portion attributed to the Gas/power unit on Noble Group Q3’s consolidated Balance sheet, Statements of Cash-Flows and Income statement.

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•  $76,000,000 of Noble Gas & Power valuation was the working capital attributed to third parties or Banks (payables finance, inventory finance, receivables finance).

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• Mercuria has paid the agreed price on the BUs to the seller minus this reverse-supplied capital by third-parties e.g restating the sales and actual P&L of Noble Gas & Power.

 

 The unit was marked by Noble at $394M in 1H-2017.

• The $185M paid by Mercuria for Noble Gas & Power also suggests that Noble self-estimated the BU at more than twice its net asset value.

“Under a deal agreed in the past couple of weeks, Mercuria has given Noble access to $400m of its unutilised credit lines in return for a fee and information about its trading positions in coal and iron ore, according to people with knowledge of the arrangement.”

To avoid confusion, Mercuria isn’t altruistically given access but is tentatively placing the deal externally for a 200-250bps fee, contingent to 80/20 banks money and two leveraged funds money-without any risk or fiduciary relationship to the related parties we muse.

These funds are not first-payee loss in the case of a total loss / get whacked.

(EFA and Inoks Capital) target 1000-1200bps net returns in Asia trade finance coveting borrowers who do not have a credit rating  / or that banks just don’t want as clients (the rotten fish).

Cost of capital is cheap, albeit distorted by low rates. 

Noble Group is the perfect designated candidate: has destroyed its credits and its WACC represents the best uncorrelated opportunity on a risk-adjusted basis.

(Except for two minor details).

1. The counterparty in the transaction contemplated by the funds doesn’t trade for a profit.
2. Doesn’t generate cash as the banks unwinding the counterparty’s balance sheet.

We think concerned investors would like to develop a discussion with their private wealth advisers.

Among other things funds disclose very little the break-down of their funds other than a monthly return or geographies. This is perhaps the only real “informational advantage” that the “trade finance funds” have.

The Noble Files 贵族档案

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 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” 🙂

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

-Strategic Review Update–26 July 2017

 

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.

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

Noble did the financial engineering for years and years and then the show–game 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. 

A fair–to–arrive net equity of $2B* is still rather delusional for a company not producing any plus-value -Noble is losing operating cash–flows 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

 

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 Noble’s 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 Trade– to–cash 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 doesn‘t 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)…  

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.

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

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Noble Group MtM on Coal contract:

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

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 tons – the 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).

 

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 :

• no financial substance.
• no unencumbered assets.
• no physical trading traceability.
• A porous  risk management and a total absence of management oversight.

 

 

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 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.

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.

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

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Noble Group MtM on Coal contract:

–

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

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

Noble’s only escape is to borrow more debt to cover its debt service and booked net equity.

Like Wilmar, Noble had not 2 but 3 years to renovate itself and they failed.

• Noble Group (來寶集團)  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
  Noble has no intrinsic value by DCF. The book is not performing.

The market is not over-reacting.

The question is now rather about how Noble can still suggest that they are a $3.9B equity company (” their fair-to-arrive net equity”). 

Simply because Noble knows it cannot devalue its substantial booked value.

• 

•  Bye Elman, the chairman and co-founder has officially resigned.

• The business has no audited flow supporting their 48B$ sales of commodities.
• Their volume by any account seems vastly overstated.

Noble has screwed up itself, its fixed income investors and its shareholders.

• Only two months ago investors were lured by a 8.75% coupon  750 million unsecured bond. The maneuver was purposely to win time and bridge financials until Noble could conclude a potential deal with an acquirer (Sinopec).
• No immediate performance catalysts suggest that this transaction is even remotely possible.

• This unsecured bond issued at a 8.75% is now trading at 50. We no longer talk of yield to maturity but recovery rates.
• This bond has to be refinanced next April.
• By what ?
• You need to factor if Noble can issue another 750M bond this time at 18-20% coupon and assume that the same investors bited by the snake will want to lose 100 to 50.
• Equity investors who also subscribed to the 500M share rights issue at 0.20/share are now at 0.05.
• Can some undisclosed aspects of Noble performance could have made the company less attractive to these investors ?

-The trader has lost $5.5M of Operating cash-flows at the end of each business day Monday-Fri during Q1.

How a serious bank will support the financing on no acceptable performance ?

Noble Group (來寶集團) is now two things; coal and oil liquids.

Credit lines have been granted on the performance of the oil liquids, the so-called “ebit indestructibility” of the Noble oil liquids segment but for Q1-17 the operating income from Supply Chains of $27M doesn’t even cover the interest rate load on this segment.

As alluded earlier, Noble Group is again in the sights of the credit agencies.

S&P questions the financial guearing of Noble. 

Noble’s only escape is to use a 2nd credit card to cover its $220M annualized interest bills and refinance its “fair-to-arrive” net equity. 

We are heading towards a restructuring event.

Noble Group: Anatomy of a Zombie Trader

Noble Group Says Listing Top Execs’ Pay Would Hurt Its Standing…

Noble Group Ltd., the embattled commodity trader, has pushed back against guidelines in Singapore for disclosing information on executives’ remuneration.

What  would hurt more Noble Group’ standing than the compensation of their Managing Directors that the company has refused to advertise in an exchange query: It’s shaky financials.

Noble Group has booked gains on these contracts to the tune of 102% of shareholder equity as of April 2017.

The company has unrealistically booked large profits on long-dated contracts ($3.6B), the value of which relies on input assumptions that are not market-observable…

Two small things to worry about Noble’s are the valuation and the uncertainty of the cash realization of these gains.

One of these gains booked is on a 10 years offtake agreement with Sundance Resources (problem: it’s a junior Australian miner with production starting in 2019 (opps!)

Noble has repeated that these contracts were correctly valued. Then in 2016, 48 hours before the publication of their FY15 annual results, Ernst & Young suddenly realized that these contracts had to be impaired by $1.1b.

At least if you were a buyer, you would expect to pay for assets generating positive cash-flows.

Problem is that Noble Group has generated negative cash-flows from the operations to the tune of and -$1600M in 2014, -$600M in 2015, and -$900M in 2016 (and I also reckon that its cash flows from operations didn’t even covered the cash interests expense of its debt service in Q2-2016…)

Noble group has no intrinsic value (by DCF).

It remains difficult to value them and put a ballpark price but no, the current price share doesn’t reflect the accounting issues and net equity issues of the trader.

OCBC bank and many analysts at brokerage houses bave simply stopped the coverage the company. Compliance officers now refuse them to cover the company on reputational risk.

It is also said in the market that the company is likely also good candidate for a downgrade by S&P.

The trader has lost its access to their counter parties in the commodity market because of stricter limitations to deal with them now. (must put down collateral to execute trades that in the past required none)

If one wishes to be very conservative:

Exclude the $1.6B inventory from its liquidity- it belongs not to shareholders but to banks and is used by Noble as the collateral to pony up $5B borrowings with the banks (because Noble Group also celebrates the envied 4th position among the top 10 commodity borrowers in the world…).

The cash realization of these gains:

Noble’s “Net Fair value on commodity and derivative instruments”. End FY 16, the net gain in fair value stands at 2,776,419,000 while end FY 15, it stood at 3,178,351,000.

Noble should have realized approximately 400,000,000 of gains, however cash flow shows its has only realized about 234,234,000 in gains (57% of the amount).

The valuation of these gains:

So one could conservatively remove the fair-value gains from Noble’s net equity computation, or give it a haircut of say 60%) when valuing the company.

Have you hear about something called inverse-leverage …

The problem is that it cannot be done because a depreciation net fair value G/L gains on commodity contracts of -19% would render Noble Group insolvent and precipitate the Asian trader into liquidation.

The further that the coal API2 curve goes on the Bloomberg terminal is 5 years… I’m curious how does William Randall, Coal Kingpin Australian brainmaster of Noble Group pulls out a 30 years mark-to-market gains. what’s that !

Do people realize that IF Noble Group contracts were properly valued a long time ago a credentiate trader (such Castelton Commodities) or and investor (like Temasek) could have bought them out.

This said, the thought process at Noble isn’t very different from the rest of the industry peers (Glencore…)

e.g MDs in independent units, under minimal supervision have crafted positions that have bleed into outright wagers. With limited trading views, constantly fight the HQ to punt more working capital.

Their entrance in some commodity markets has been always marked by spectacular moves.

Their tactic has been volume is at any cost, throwing their weight around; (Noble Agri, Noble Americas…)

This has naturally created a pattern of brutal exits.

Noble Group 4th position on the top 10 commodity borrowers

Congratulations to Noble Group who now makes the top 4th position on the top 10 commodity borrowers list

With $5B, Noble Group makes the top 4th position on the top 10 commodity borrowers list. Cautionary tale:  We need to know with some precision what Noble are actually using the money for.

Noble is known remarkbly active in the financing market but less in the commodity market.

The struggled acquisition of Noble Agri by Cofco has shown how difficult it is to impose success to a company’s assets with a substantial booked value despite no acceptable performance and very few financial substance (if not any of it).

 

The Noble Files 贵族档案

More people doubt the revenues of Noble Group.

Noble Group growth seems very artificial,  volume is at any cost in order to compel name recognition.

A great deal of criticism should be levelled at Noble Group for their lack of financial substance.

How can any trader in the world have an Inventory-in-transit of $2.6M for a  cost of goods sold of $48.524B ?

If we believed Noble, by its revenues, the Singapore-listed trader would be a trading giant second to Mercuria, (company with traceable flows and assets).

However the revenue per employee of Noble’s peers, only brings more questions about the veracity of Noble Group reported revenues and volume.

The revenues/employee of Mercuria and Gunvor put Noble Group in the   8–8.4B$  revenues fork.

At $101M per employee and the sales of Mercuria, Noble would have estimated $8B revenues.

At $4.9M per employee and the sales of Gunvor, Noble would be a $8.4B revenues company.

The audited inventory-in-transit, the level of RMI, and the peers analysis both place Noble as a company with implied revenues 11X to 12X less than the amount reported.

It is not clear how Noble can claim a turnover of nearly $100B per year with an unaudited physical traded volume of 182 million metric tons (2016) and 183 million metric tons (2015).

Noble is known very active in the financing market.

Yet no evidences have suggested that the physical operation of Noble  possesses any of the hallmarks normally associated to one of the largest commodity trader (chartering of ships and by tonnage)…

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

-$900M in 2016,

-$600M in 2015

and

-$1600M in 2014.

Worse, the core of its booked net equity which is 102% of fair value gains/losses booked on assets.

How a company with no acceptable performance can still present a net positive equity of $3.92B ?

With $5B, Noble makes the top 4th position on the top 10 commodity borrowers list.

TXF data

Cautionary tale:   We need to know with some precision what Noble are actually using the money- for a “to-arrive net-equity” that the trader has  to continuously re-finance.

The struggled acquisition of Noble Agri by Cofco has shown how difficult it is to impose success to a company’s assets with a substantial booked value despite no acceptable performance and very few financial substance (if not any of it).

Noble is known as remarkably active in the financing market but less in the commodity market.

These anomalies only reinforce our belief that Noble is not even close to one-fifth of the $97 billion sales company it touts to be.

The Noble Files 贵族档案

Sinochem and Noble Group Americas Take-or-Pays.

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

How the “core assets” (contracts) are now performing ?

Oil liquids had an EBIT of $646M in 2015, thanks specifically to three deals on Colonial, Magellan and Explorer pipelines. noblegroupreasearch.wordpress.com 2016/06/06

Noble has confirmed that it is losing money since  at least 8mth on the pipelines as we predicated earlier. noblegroupresearch.wordpress.com2016/11/21 

Noble Group Financial Performance Presentation FY16

Note the

“However, profitability was significantly impacts by working capital constraints as we managed for liquidity, inhibiting the business’ ability to enhance margins by monetizing the embedded optionality in the franchise”

The U.S oil liquids business has operated at a loss $23M during Q4-2016.

Now caught in-between, with losing positions the trader frames it as “it’s because of liquidity constraints” as it tries to sell this U.S oil liquids unit to Sinopec.

This is the also company who has burned $900 millions in OPERATING CASH-FLOWS in 2016 but printed an accounting profit… only figure.

The Noble Files 贵族档案

Noble, from Speed boats to Hypersonic Missiles.

The Transit Time on Colonial Pipeline, if you go from one end to the other (Houston to New York) is about 16 days.

Most of ship voyages in Asia are less than 10 days but apparently this is too much for Noble Group.

Are Conventional Ships now too slow for Noble Group Ltd  ?

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

FY2015 the average transit time of Noble was 3.5 days.

FY2016 The average transit time of Noble, is now 0,019 days. It either implies that Noble has used hyper sonic missiles or that the corporation has a COGS inflated by 10 to 15 times in 2016.

If Noble, has always self-proclaimed itself as a corporation of +1000 employees working on busy trade floors, even more doubt their revenues.

Yet, none of the evidences suggest that this operation possesses the normal footprint associated to one of the largest commodity trader.

They have gone from cargoes put in the speed boats with the Elmans… to the Mach 5  speed with captain William Randall.

 Audited Financial Statements 31 December 2016

The Noble Files 贵族档案

Noble Group’s “Fair-value to-arrive equity”.

The Net Equity (Assets-Liabilities) is used by lenders to fund a trader.

Noble Group has not built net equity, losing more than $3B in Free-cash-flows over the last 29 months.

This is the loophole:

The backbone of Noble Group’s net equity represents future gains on commodity contracts that are re-evaluated/impaired only once a year under IFRS 13-Fair Value Measurement. Net Fair Value G/L on commodity contracts accounts for more than 102% of Noble Group’s equity.

Not only this FV on G/L can be improperly valued.

Noble has also to fund this “Fair-value to-arrive equity”.

Noble is not worth its book value, or even 62% of its book value. It is worth much less than that, if there is any residual value left. Discussions are only at early stage and due diligence typically takes six months to a year. Any potential investor needs to value the commodity contracts, which are the heart of Noble’s financial manipulations. This includes the fair value gains ($4b, nothing less than 102% of equity) but also importantly the future liabilities ($1.7b). The investor has to make sure that no off-balance commitment is hidden, etc. This is a very lengthy process. After we published our reports, Noble kept repeating that these contracts were correctly valued. Then 48 hours before their 2015 annual results, Noble and its auditor, EY, suddenly realized that these contracts had to be impaired by $1.1b. Oops!…

So are commodities contracts (assets and liabilities) correctly valued now? Of course, they are not. Noble has been battling liquidity issues for months and any trader would have sold these contracts a long time ago if they were valued correctly.

read more

How the “core assets” (contracts) are now performing ?

In 9 months, Noble’s operations burnt $801m in line with the expectations.

Oil liquids are the core assets of Noble.

One month ago we asked How the “core assets” (contracts) are now performing ? raising serious  doubts about real profitability of the business line  and its line manager.

“Oil liquids had an EBIT of $646M in 2015, thanks specifically to three deals on Colonial, Magellan and Explorer pipelines.

Knowing that:

• Noble Oil Liquids operates in the [1 – 1.8] % sub-margin band and accounts for more than 70% of the operating income of the supply chains at Noble.

• Several traders have cut their bilateral opened-credit lines with the “big swinging dick”.

How the “core assets” (contracts) are now performing ? “

Noble Group 9M-16 Investor Presentation

Note the “However, physical and pipeline flows in the various liquids products remained strong”-Strong deals in the  red  should be added.

Noble has confirmed that it is losing money since  at least 8mth on the pipelines as we predicated earlier.

To  get  a good appreciation of the situation, one has to go back 2015 take snapshot 9M2015 and realize that the credit lines have been backed by  the ebitda  indestructibility of the Noble oil  liquids segment.

Noble Group,  Financial  Presentation, 9M-2015

We are in the lose-lose phase and simply cannot believe the banks will go unprotected warehousing the revolving credit facility (RCF) risks.

The credit swap is pricing a default.

The Noble Files 贵族档案

Noble Americas Energy Solutions: Is Noble framing a situation different from the reality ?

If you were sitting on a trading desk like Noble Americas Energy Solutions, expecting power prices to follow record loads last summer, you would have been be sorely disappointed.

In August, Peak power prices for ERCOT, during the record demand, averaged near mid-$40s/MWh, hardly a level one might expect when compared with events in the past as prices were seen moving up and sometimes in the $400s/MWH territory for real-time markets.

THE ENDANGERED BUSINESS MODEL OF NOBLE AMERICAS ENERGY SOLUTIONS:

In most cases, when a market is short on supply, this situation presents an opportunity for someone like NAES to step up to fill in a gap.

-Short-term contracts that typically involves scheduling in the day ahead market and selling when the prices are moving up. 

-With respect to volatility, these contracts do not generate profit at a low variance. 

-NAES are also securing the shorts under long-term contracts, selling power to counter-parties assuming that higher electricity prices will materialize over seasons, years.

In a presentation, Noble valued these contracts at a book-value of more than $1.45 billion.

It is not a coincidence if the Singapore-listed trader, who is at the center of a profit accounting dispute, has hired Morgan Stanley for the disposal of Noble Americas Energy Solutions. 

Why aren’t they de-listed ? 

To facilitate the disposals is the 1ST REASON.

The current market situation in the U.S power is not a compelling business future case for Noble Americas Energy Solutions, (path dependent for the group own survival). 

This should cause a little concern among those who are trying to determine the intrinsic value of NAES currently on the sale block.

They have lost more than $3B in FCF over the last 24 months.

During Q2, the cash-flows from the operations didn’t even covered the cash interests expenses of their debt service.

Given that the trader is not generating cash and cannot expand its borrowing base, we can only assume that they are told that they have to sell Noble Americas Energy Solutions to repay the debtload. 

This is at 20-50% below the advertised book value to hit a bidder => and the house will consequently have to raise a significant shortfall in equity to repay the loans its lenders $3 billion, hence outlining the second and last REASON explaining why the Noble Group counter has remained listed on the Singapore Exchange at the present time.

How the “core assets” (contracts) are now performing ?

“One trader in the states keeps making huge money every year on pipeline deals, without him the story of oil liquids as a whole would be completely different.”*

 

• Oil liquids had an EBIT of $646M in 2015, thanks specifically to three deals on Colonial, Magellan and Explorer pipelines.

• In the past because they had just to sit  and were making money.

• Now the majority of these deals are the red, some are losing -1c/gal/cycle, the trader has to keep losing money only to conserve its priority on the lines and fill its contracts until an arbitrage arise.

• It is publicly known that the value of the lines have dipped into negative values for the shippers like Noble (implying no price arbitrage) –
  e.g
  the Positive MTM Fair Value MTM that the trader has on these commodity contracts has also to be marked down.

• The trader has no refineries and unlike BP and Shell cannot afford to lose money each day in transportation to regain everything in cracking margins and volume % market share.
• It is well-known that Noble is Asia’s largest commodity trader but its role in America has remained largely ignored in the public.
• FYI Noble Oil liquids is shipping in excess of 1 million barrels per day, it is the largest gasoline blender in North America.

 

Knowing that:

• Noble Oil Liquids operates in the [1 – 1.8] % sub-margin band and accounts for more than 70% of the operating income of the supply chains at Noble.

• Several traders have cut their bilateral opened-credit lines with the “big swinging dick”.

 

How the “core assets” (contracts) are now performing ? 

• “Control-wise, a total mess” -Ex Noble, March 10, 2016

Resignation of Noble Group’s CEO, Yusuf Alireza

Iceberg Research

Mr Alireza was recruited four years ago by Noble. His first day as CEO of this large physical trader was his first day in the commodity business. The learning curve has been a painful experience for the company’s shareholders: the share price fell by 76%. Noble dramatically underperformed traders that can be short or long commodities. The trader even underperformed some producers that are structurally long.

Mr Alireza is not responsible for all the accounting issues at Noble. The dubious mark-to-market did not start with him. The level was already suspiciously high under the previous CEO, Ricardo Leiman. Mr Alireza also found Noble in poor shape after his predecessor made investments in sugar assets at the very wrong time. This would plague Noble’s performance for years.

But Mr Alireza could have walked away from a company increasingly dependent on accounting alchemy to hide bad results. Instead, he embraced the system…

View original post 328 more words

“The Big N”

On May 17, Fitch has joined Moody’s and Standard & Poor’s in cutting the Hong-Kong trader to junk, citing a shift toward a short-term financing would weaken their debt profile to a point they could no-longer be investment grade”.

“Noble has lost US$1.5 billion in bank lines. Trade and other payable has decreased by US$1.271 billion with approximately 50% due to the tightening of the Group’s uncommitted unsecured bank lines which resulted in a reduction in the availability of term letters of credit”.

Noble Group MD&A Q1-2016  p.18

“The decrease in trade and other payables was due to: “in the money” Oil Liquids futures contracts rolling off with corresponding decrease in cash margin liabilities to brokers which are included in trade and other payables; and the tightening of the Group’s uncommitted unsecured credit lines.”

Noble Group Q1-2016 Presentation p.10

Bye Bye positive Cash-Flows; Welcome MTM Gains ?

 

Today Noble’s narratives are muttered, find only why.

Refinancing is reported under-subscribed and on highly disadvantageous terms.

Noble Group’s Cliffhanger

 

 

2010:  Harry Banga splits… most of Noble problems start here.¹

2015:  Noble Group, one of the biggest traders of commodities from coal to iron ore is melting from its base.

Script writers have devised the solution of telling us a story  but leaving it at a cliffhanger, thus forcing the market to postpone their execution to hear the rest of the tale.

A villain was designed and a lawsuit with an injunction was filed with the Hong Kong High Court asking to ban his research, hoping to ensure the audience will return to see how the characters would resolve the dilemma.

Won’t Pay the Benefits ?

It is well-known in the industry that staff movements are frequent (each 3 months) and lateral moves are common at Noble Group Ltd. The company is characterized by its high HR turnover.

noblegroupresearch.wordpress.com has learnt that at least 20% of the Houston Office trade floor were sacked on Monday March 14.

Mini-Quiz #2

Refinancing Noble: a Lose-Lose Deal

“Control-wise, a total mess” -Ex Noble

KEYWORD: GUIDANCE ON OIL LIQUID DIVISION, NON-CONTINUATION OF PROFITS, COLONIAL PIPELINE, JEFF FRASE, EX NOBLE EMPLOYEE, NON DIVERSIFIED BUSINESS.

Mini-Quiz

Figure 5- Consolidated Balance Sheet

From, Figure 5- Consolidated Balance Sheet, a drop of just__________ in the assets value would render this Commodity Trader insolvent.

A) -30%

B) -19%

C) -29%

D) -12%

Profit and Losses (P&Ls) in Real Terms

P&L IN REAL TERMS

You’d expect to have the P&L stated by US$ 100,000 of capital used.

 

Figure-4 Noble Group Profitability per $US 100,000 of capital

Figure 4 tells us that if Noble Group’s profit is too low / expansive in real terms.

In all fairness, Noble Group doesn’t make it and if is was a trade floor at a bank, they’d be cut out.

The commodity trading unit is at least two to three times less than the threshold that a JP Morgan or a Citigroup would set PER $100,000 for their proprietary capital.

Bankers, arguably the experts in risks, do not trade a very-low profitable book and lend money to the cash-addicted company instead of trading directly.

You would also expect to have the P&L PER US$ 100,000 of capital stated in relative terms:

Figure-5 Noble Group Profitability per $US 100,000 of capital vs Cargill

THE RISK OF HIGH LEVERAGE AND A PLUNGING ASSET VALUE

Noble’s HEDGING exceptionalism