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.
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.