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Junk Isn't Very Noble: Asia's Largest Commodity Trader Responds To Moody's Downgrade
In mid-August we warned that Noble Group's downgrade to junk by one or more rating agencies, was inevitable, a downgrade which finally took place yesterday when Moody's downgraded the firm from Baa3 to Ba1, keeping it on outlook negative (we expect S&P to follow suit in the next few days).
The reason why the downgrade was "catalytic" for the company is because while one can debate Noble's existing liquidity (recall that in anticipation of just this downgrade, Noble increased its secured revolving trade credit facility to $1.1 billion from $450 million in October), the reality is that the majority of Noble's banking facilities are contingent on retaining an Investment Grade status. As such, it is only a matter of time before a feedback loop of shrinking liquidity collateral calls which prompt asset sales, which force even more collateral calls, until finally the company succumbs to its vast debt load, takes place.
For now, however, Noble refuses to throw in the towel, and overnight released the following statement on the Singapore Exchange where its massively beaten down stock trades:
Noble Group statement on Moody’s credit rating action
We note the action taken by Moody's in downgrading us on 29 December 2015, following their recent lowering of ratings across the entire commodity sector.
Whilst we respect Moody's decision, we are of the firm view that, once the just announced Noble Agri deal closes, our rating metrics will substantially exceed those required of an investment grade credit. We are confident that the deal will be approved by our shareholders and will close before the end of February.
It is unfortunate that this transaction has seemingly, in our view, been outweighed by Moody's negative view of the commodity producer segment.
As an asset-light supply chain manager, the current environment is opportunity rich and plays to our strengths, while the low price environment substantially reduces the working capital required to support our business.
The matter is not expected to have any material financial impact and/or any material impact on the Group's operations.
We continue to enjoy investment grade status with our two other ratings agencies and will work with Moody's to ensure that our rating reflects the financial metrics that Noble will attain.
Noble Group Limited
30 December 2015
We haven't seen a new CDS run as of this morning, but judging by where the company's implied default risk was last night (77%), the market isn't holding its breath for Noble management to be proven right.
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Creditors can remain pissed off longer than you can remain solvent.
You only fret whe the payment is not met.
Always amazed me how long creditors wait until they say "fuckit'.
Hope vs. change is a powerful thing.Especially misguided hope.
The 2 bonds of Noble, maturing 2018 and 2020 are trading around 65 cents.....so there is that......:)
http://www.boerse-berlin.com/index.php/Bonds?isin=XS0906440333
https://secure.fundsupermart.com/main/bond/bond-info/factsheet.svdo?issu...
Most banks across Asia had lent money to Noble, so they were recommending those bonds to their clients.....
I wonder when clients will start suing the banks......
some bitchez about to get corzined
I'll take that bet.
After telling us Orange County CA was "AAA", and Stockton CA, and every subprime mortgage... it should be mentioned that the fools at Moody's think the US government is selling investment grade debt.
Existing debt is already 400% of GDP ($20 trillion on balance sheet, at least another $80 trillion off balance sheet). Spending deficits are projected for the next three decades, only because they don't project beyond that. There is no credible suggestion, never mind plan, to balance spending. Older generations plan to default; younger generations are underemployed or just plain unemployed -- the tax base is in serious trouble. Moody's considers THAT investment grade?
And the obviously junior staff managing ZH over the holidays is busy parroting Moody's report as though Moodys hadn't completely fucked up for the last decade?
Commodities are raw goods used to make stuff people want....and right now...people don't want.
The clue here is the word "commode" in commodities.