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ClippingTheir Wings

10 May 2017 by lberuti

The last time we heard about NOBLSP ( Noble Group Limited ) was in February when the company announced they were in discussions with a potential strategic investor, which people identified as China’s state owned Sinochem Group. With Singapore enjoying a bank holiday, few were expecting a profit warning from the commodity trader ahead of their results which should be published tomorrow. Because of wrong way bets on coal prices, NOBLSP predicted a first-quarter loss of roughly $130mln. A profit warning is never good news, but analysts considered it particularly bad in the context of the group reduced scope and scale following their recent disposals. On top on that, the embattled firm did not renew a $615mln credit line that was due to mature this week. It will eat into their liquidity pool and people fear it will hamper their trading capabilities and clip the wings of their traders. While we will have to wait until the equity market comes back from its day off tomorrow to see how the stock react, NOBLSP’s 5-year risk premium was marked 5.5 points upfront wider. Its 5-year default probability jumped 7pts higher to 43%.