I have written about rating agencies before, in not too positive terms, being hopelessly slow and conflicted.
Standard & Poor's has added further to this impression by downgrading Noble Group's rating to junk only now:
"S&P lowered Noble Group’s rating to BB+ from BBB- and placed it on watch for further possible downgrade, the ratings company said in a statement on Thursday, following a similar move by Moody’s Investors Service in late December. Noble’s dollar bonds due in 2020 dropped to a record low of 54.78 cents on the dollar, according to prices compiled by Bloomberg."
Iceberg Research, the company that started to roll the ball in this case almost one full year ago, wrote this about the downgrade:
S&P has downgraded Noble Group to junk today, following a similar move by Moody’s.
The downgrade validates one of our main arguments against Noble: this company has never been investment grade. In fact, the question is why did it take so long when it was clear that Noble has been bleeding cash for years, and after we showed that profitability was supported by dubious mark-to-market?
The decision will have an important impact on Noble’s liquidity and the perception of its creditors. This further complicates the refinancing of its debt. Noble’s annual results will soon be audited and we doubt that this time, EY will take more legal risks when they sign off on the accounts.
The financial manipulations were conducted to artificially preserve the investment grade rating. The accounting illusion is now over. With a share price down 71% since our first report, and strong doubts over the balance sheet, Noble is facing an even more acute crisis. The group is slowly moving toward bankruptcy.
Most of our arguments on Noble’s accounting have already become facts. This management has completely lost credibility. It is urgent for Noble’s stakeholders to replace Mr. Elman and Mr. Alireza before the company sinks with them.
Saturday, 9 January 2016
Thursday, 7 January 2016
Dangers of Private Equity
I am not exactly a fan of PE (Private Equity), have read to many horror stories about this industry. Too often it involves asset stripping and a huge amount of leverage. I guess there are exceptions though, although I haven't seen many.
One interesting read in this category is the following:
"Dick Smith is the Greatest Private Equity Heist of All Time"
"Want to know how to turn $10m in to $520m in less than two years? Just ask Anchorage Capital. The private equity group has pulled off one of the great heists of all time, using all the tricks in the book, to turn Dick Smith from a $10m piece of mutton into a $520m lamb."
And the not unexpected follow up:
"Why Banks Pulled the Pin on Dick Smith"
One interesting read in this category is the following:
"Dick Smith is the Greatest Private Equity Heist of All Time"
"Want to know how to turn $10m in to $520m in less than two years? Just ask Anchorage Capital. The private equity group has pulled off one of the great heists of all time, using all the tricks in the book, to turn Dick Smith from a $10m piece of mutton into a $520m lamb."
And the not unexpected follow up:
"Why Banks Pulled the Pin on Dick Smith"
Sunday, 3 January 2016
When will Hibiscus bloom? (4)
There has been confusion regarding the size of a stake in subsidiaries of Hibiscus Petroleum. The company was queried by Bursa and gave some answers.
It looks like a rather murky affair, with lots of legal angles, many of them in jurisdictions outside Malaysia, very difficult to evaluate. These kind of legal battles tend to be costly and can take a long time to resolve.
Kinibiz wrote an interesting article about the affair, some snippets:
This leaves Lime Petroleum Plc – in which Hibiscus Petroleum has 35% – with just 3.51% compared to 73.82% previously.
According to a report by Singapore Business Times, LPN cut its share capital from 382 million Norwegian krone to 80.32 million krone by accounting for 30.9 million krone of uncovered losses and transferring 270.8 million krone to other equity. Then 900,000 LPN shares held by Rex were cancelled and Rex then reinvested the 77.4 million krone it received into LPN for new shares.
On Dec 14, 2015, Singapore Stock Exchange-listed Rex International Holdings Limited, which owns Rex Middle East, announced that it now controls 98.77% of LPN – up from 73.82% –following a restructuring of the company’s capital.
....
In other words, surely Hibiscus Petroleum had knowledge of the exercise proceeding as a shareholder. What went wrong?
Among others, shareholders tracking Hibiscus Petroleum’s filings to Bursa Malaysia would not know much detail of what sort of restructuring took place at LPN. There is also scant information on how much was disclosed to Hibiscus Petroleum prior to the restructuring taking place and how accurate the company thinks this information may have been.
A number of questions rise for the average minority shareholder in Hibiscus Petroleum as well as the market at large, given the relative scarcity of information as to what really happened leading to this remarkable dilution in one company.
Hibiscus is raising money through a private placement (as it had done many times before), which will give some much needed support to its balance sheet. But at a share price much lower than most other shareholders paid for their shares, giving rise to large dilution.
From the moment that SPACs were announced by the authorities a few years ago, I have been very skeptical about them. I don't see yet any reason to change that stance.
It looks like a rather murky affair, with lots of legal angles, many of them in jurisdictions outside Malaysia, very difficult to evaluate. These kind of legal battles tend to be costly and can take a long time to resolve.
Kinibiz wrote an interesting article about the affair, some snippets:
This leaves Lime Petroleum Plc – in which Hibiscus Petroleum has 35% – with just 3.51% compared to 73.82% previously.
According to a report by Singapore Business Times, LPN cut its share capital from 382 million Norwegian krone to 80.32 million krone by accounting for 30.9 million krone of uncovered losses and transferring 270.8 million krone to other equity. Then 900,000 LPN shares held by Rex were cancelled and Rex then reinvested the 77.4 million krone it received into LPN for new shares.
On Dec 14, 2015, Singapore Stock Exchange-listed Rex International Holdings Limited, which owns Rex Middle East, announced that it now controls 98.77% of LPN – up from 73.82% –following a restructuring of the company’s capital.
....
In other words, surely Hibiscus Petroleum had knowledge of the exercise proceeding as a shareholder. What went wrong?
Among others, shareholders tracking Hibiscus Petroleum’s filings to Bursa Malaysia would not know much detail of what sort of restructuring took place at LPN. There is also scant information on how much was disclosed to Hibiscus Petroleum prior to the restructuring taking place and how accurate the company thinks this information may have been.
A number of questions rise for the average minority shareholder in Hibiscus Petroleum as well as the market at large, given the relative scarcity of information as to what really happened leading to this remarkable dilution in one company.
Hibiscus is raising money through a private placement (as it had done many times before), which will give some much needed support to its balance sheet. But at a share price much lower than most other shareholders paid for their shares, giving rise to large dilution.
From the moment that SPACs were announced by the authorities a few years ago, I have been very skeptical about them. I don't see yet any reason to change that stance.
Saturday, 2 January 2016
Utusan crushes Buffett's track record (2)
Utusan was queried by Bursa regarding the mysterious deal in which they made such a huge profit in such a short timespan.
Some excerpts:
In other words, hardly any concrete information except that there might be a "certain" land deal. All as expected, if I might add.
Although Utusan might have crushed Buffett's record, I doubt that Buffett would have the least interest to invest in this company.
Some excerpts:
- .... has since recently been more active in seeking to create its own land banks for future property development.
- .... there is no property development projects which have been launched by Maqamad or to be launched. However Maqamad is in the process of finalising a certain land deal.
- .... Utusan is unable to disclose the details of the land deal as it will jeopardise the successful financial and legal closure of the said land deal.
- Shareholders' funds/Net Assets (‘NA’) (1,803,910)
In other words, hardly any concrete information except that there might be a "certain" land deal. All as expected, if I might add.
Although Utusan might have crushed Buffett's record, I doubt that Buffett would have the least interest to invest in this company.
Subscribe to:
Posts (Atom)