Noble Group, founded in 1986 by Richard Elman, is known for being one of the world’s biggest commodity traders but now its very survival is in question. The company is incorporated in Bermuda and is listed in Singapore Exchange. We have seen its market value wiped out from US$6 billion in Feb 2015 crises.
This is a classic tale of smoke and mirrors, hubris and denial. Some events like Enron mark a generation. By no coincidence Enron’s business model was comparable to that of Noble, except that Noble has not yet filed for bankruptcy.
Noble had a great story to tell, just like Enron. Here is a quick glance on the key events that led the downfall of Noble Group:
In February 2015, a small outfit called Iceberg Research produced a report that made a pretty good job of showing that the emperor had no clothes. Noble’s share price tumbled as much as 65% as it was accused by Iceberg Research of overstating its assets by billions of dollars, claims which Noble rejected. Since then, Noble’s share price has plunged further as much as 75%, or over S$6 billion, to S$1.8 billion and its debt costs have risen as it lost its investment grade rating and battled the worst commodity price rout in decades.
In January 2016, S&P downgraded Noble to junk as the company’s liquidity is below what S&P expect for a strong liquidity position, despite the sale of its agricultural unit, S&P credit analyst said. However, Noble still holds an investment grade rating from Fitch Ratings.
In May 2016, Noble CEO, Yusuf Alireza resigned unexpectedly “for family reasons”. However, a longer statement from Noble Group states that he has completed a “transformation process” at the company and “considered that the time was right for him to move on.”
But most investors don’t buy the aforementioned statement – the company’s stock fell nearly 5% in Singapore trading on that day of his resignation.
In May 2017, Noble Group’s shares plunged on Thursday after company warned of losses in 1Q17 – that it will record a net loss of around US$130 million for the first quarter.
Shares of Hong Kong-based company, which includes China Investment Corp. as one of its largest shareholders, slumped 32%, the biggest decline on record and the lowest level since October 2002. The has slashed Noble’s market value less than $1 bil in US dollar terms.
In November 2017, Noble Group lost support from one of its key banks as Singapore’s DBS Group Holdings Ltd cut lending, according to a person with knowledge of the matter. Share price also plunged further in this case.
DBS also sold its $60 million stake in Noble’s $1.1 billion revolving credit facility due in May 2018, and also closed some other financing to the company, according to The Business Times.
In August 2018, Noble Group faces a crucial key shareholder vote on its controversial $3.5bn restructuring plan, which could determine its survival.
Trading in Noble’s shares was halted on 27 August 2018 pending an announcement by the company.
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