tradaxSINGAPORE (Dec 30): Noble Group bonds fall as Moody's downgrades them to “junk” status, proving the commodities firm's recent asset sale to turnaround its finances fails to impress, says Dow Jones.
The company's 2018- and 2020-due bonds are down three points to 66 cents and 69 cents on the dollar, respectively.
“People have been hopeful that Noble might avoid a rating downgrade after the asset sale but it couldn’t,” said a Hong Kong-based credit trader at a Japanese investment bank.
The trader notes, though, there’s almost no transactions of the bond, mainly due to the holiday season.
The price decline largely reflects dealer quotes and bearish sentiment amid a difficult operating outlook for the company.
Standard & Poor's is likely to be next to cut Noble's rating to “junk” as the rating agency remains skeptical, even after Noble's move to raise US$750 million ($1.06 billion) by selling its remaining stake in Noble Agri.
tradaxNoble Group’s “Collateral Margin Call” The downgrade of Noble Group by Moody’s depicts an aggressive financial risk and a vulnerable business risk profile* I) the first-order problem is Macro. "The downgrade of Noble Group to sub-inv. is worrisome, but the main story is about the evolution of the commodity price downtrend. 1st round effects were felt in macro indicators (lower CapEx & growth for producers and following FX/interest rate adjustments). 2nd round effects will be about commodity exporters' governments reactions." Those effects will dominate in 2016 said Sacha Duparc, Head trader and structurer at Banque Cantonale Vaudoise. II) Collateral margin call. The trader has billions of dollars in commodity prepays with NOCs and producers, the value of inventories and receivables collateralized by traders into trade finance arrangements have cratered in the past year. This collateral value of Noble Group is being depressed, those loans are been called even if Noble Group (buoyed by liquidity in 2015) never missed a payment because the market says that Noble’s assets are worth less than they claim on their books. Banks are requiring at least 1.6 B$ more in additional collateral that Noble Group hasn’t built over the good commodity years… Noble is being placed into either bankruptcy or they are been place in a tremendous economics adversity that so far they've not seen in 2015. People have been hopeful that Noble might avoid a rating downgrade after the asset sale but it couldn’t,” said a Hong Kong-based credit trader at a Japanese investment bank. Noble's move to raise US$750 million by selling its remaining stake in Noble Agri. I repeat what have said earlier in a previous comment: Noble Agri Sale was strictly a Collateral margin call. Noble Group must raise money but their collateral base is new book value of 4,528 million while their Net Positive fair values gains of commodity contracts and derivatives exceeds MTM is over 4,500 million…
* Moody’s Global Credit Research - https://www.moodys.com/research/Moodys-downgrades-Noble-Group-to-Ba1-outlook-negative--PR_341857
By any model, this MTM represents between 90% and 105% of their book value.
Banks aren’t provided with the access of the exact breakout of the 4,500 million and PwC has not been able to review the exact assumptions and models behind these Net Positive fair values gains of commodity contracts and derivatives. Perhaps, Antoine Lavoisier, French nobleman of the 18th century and father of modern chemistry must have a great influence on the financial reporting of Asia’s Largest Commodity trader with "Nothing is lost, nothing is created, and everything is transformed".
Solvency Problem, not liquidity I will make it clear that it is not Liquidity that banks are asking but for more Collateral from Noble starting this year because they also understand that this MTM gain on commodity contracts and derivatives of Noble will unlikely be realized at more than 10% and therefore is not valid collateral for the trader’s working capital borrowing base requirements. A close friend hedgie in NY recalled me that at the height of 07', a IB sale desk lured them into "taking a position into undervalued trading books of the bank temporarily mispriced because of market illiquidity". At only 66cents on the Dollar, the deal turned-out to be 0.6 cent sinky.
tradaxNoble Group, Asia’s top commodity trader, has endured short selling attacks from the likes of Muddy Waters LLC and the anonymous Iceburg Research. With its stock value cut by over ¾ on a year over year basis, and bouncing near all-time lows, along comes a new report from Moody’s calling for a “collateral margin call.”
joseph3333There is more downside pressure on China Stocks.Samuel Shen and Nathaniel Taplin 17 Mins AgoReuters.
SHANGHAI, Jan 29 (Reuters) - Chinese companies may be forced to sell at least $12 billion in shares in coming weeks to meet margin calls, dealing a further blow to stock markets which have already seen some $2 trillion in value wiped out so far this year. Some companies that had pledged shares as collateral for loans are now faced with a stark choice - dump them under pressure from impatient brokers and banks and book a loss, or stump up fresh cash or other assets to make up for the difference in value.
If that wasn't enough to dash hopes that China's markets will soon claw back from 14-month lows, fresh selling pressure is coming from mutual funds and hedge funds which are liquidating positions as shell-shocked investors race to withdraw what cash they have left.
High Beta Stocks like Noble and Golden Agri much better.
All that is leading to a vicious cycle where further share price drops are likely to trigger more margin calls and threaten further forced sales.
But I will sell it when reach my target price. Profits taking then will buy back if drop
Luckily enough collect some from panic sellers at 99cents
Wan_MarissaI agree with you Lincorn. I also bought it and sell on my expected price. To get the best advice on trading we must have to try MMF Solutions Malaysia. Their signals have the highest accuracy.
TomYamSuntec REIT – Will It End The Strong Rebound?
From the weekly chart, we can clearly see that Suntec REIT has been in a downtrend over the past two month.
Generally, it is relatively safe to sit on the short side. For the past two weeks, Suntec REIT rebounded strongly without any deep pullback. It will be relatively safe to short on rebound when bulls used up their energy.
Despite Suntec REIT went up yesterday, it was not able to hold at high end when the market closed. This indicates that sellers may start to control this stock for the next few days. One may consider shorting if it rebounds to around 50 percent Fibonacci retracement level.
Old90*Sinochem Group, China’s biggest seller of seeds and fertilizer, is in advanced talks to buy natural-rubber supply-chain manager Halcyon Agri Corp. in a deal valued at about $300 million, people with knowledge of the deal said. Halcyon has a market capitalization of about $260 million. *A deal could be completed by end of this month, one of the people said.