I) the first-order problem is Macro. "The downgrade of Noble Group to junk status 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.

1. 31/1/2016 Noble Group's "Margin Call" Part II: The Enron Moment | Zero Hedge
http://www.zerohedge.com/news/2016­01­10/noble­groups­margin­call­part­ii­enron­moment 2/20
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Noble Group's "Margin Call" Part II: The Enron
Moment
Submitted by Tyler Durden on 01/10/2016 21:17 ­0500
Bond Enron ETC Investment Grade Rating Agencies Rating Agency
ratings
12
­ Noble Group 2014 Annual Report, p. 27
* * * * *
­ Moody's, December 29, 2015
* * * * *
­ Standard & Poors, January 7, 2016
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"Our balance sheet ­ the strongest in recent history ­
represents a significant advantage as we continue to
identify high value growth opportunities across the
products and geographies we operate in.
Maintaining our investment grade rating with
the international rating agencies is a vital part
of this strategy."
"Moody's Investors Service has downgraded Noble
Group Limited's senior unsecured bond ratings to Ba1
from Baa3 and the provisional rating on its senior
unsecured MTN program to (P)Ba1 from (P)Baa3."
"Noble Group Downgraded To 'BB+' On Weakened
Liquidity; Notes Lowered To 'BB'; Ratings Still On
CreditWatch Negative"
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2. 31/1/2016 Noble Group's "Margin Call" Part II: The Enron Moment | Zero Hedge
http://www.zerohedge.com/news/2016­01­10/noble­groups­margin­call­part­ii­enron­moment 3/20
Noble's "Margin Call" Part II ­ The Enron Moment
By Simon Jacques
The story of Noble is worth writing a book, mostly of how not to
run your business.
If they are in this mess, it is in large part because the
management was comprised predominantly of traders who were
predisposed to defend their books.
Noble has been desperately trying to revive their image by hiring
former Goldman, JP. Morgan, Trafigura executives etc. By doing
so they were looking for a form of credibility collateral.
It didn’t work well for the new employees as they rapidly found
out that they inherited from the liabilities of one decade of
Noble’s poor decision making of the hard­core asset guys like
William J. Randall and ex­Goldman Sach banker Yusuf Alireza.
In the part II of this analysis we will review the gap between the
liquidity headroom and the debt maturity profile of the trader and
explain how Noble Group will have its Enron moment.
The fatal mistake that Noble Group did was apparently to mislead
the market about their financial performance "presumably" by
using accounting devices.
During last November, Noble Group's chief financial officer
Robert van der Zalm has stepped down from his position after
taking a leave of absence for “health reasons”.
Two months later, Moody’s downgraded Noble Group.
In a very awaited decision, Standard & Poor’s has finally lowered
Noble Group’s to junk, placing Asia’s largest commodity trader on
watch for further possible as the rating agency remains skeptical
about the liquidity headroom of the trader.
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3. 31/1/2016 Noble Group's "Margin Call" Part II: The Enron Moment | Zero Hedge
http://www.zerohedge.com/news/2016­01­10/noble­groups­margin­call­part­ii­enron­moment 4/20
According to Noble Group, on September 30th 2015, the company
had $15.5bn banking facilities and $1.669B in RMI (ready
marketable inventories).
$11.1bn of these $15.5bn banking facilities is uncommitted
and are contingent on ability of maintaining investment­
grade rating in the future.
Noble claims to have $900M of cash and 1.669B$ in RMI
(ready and marketable inventories).
Their 1.669B$ in RMI have claims on related­ party notes
that are under collateralized by their commodity merchant
activity and therefore should be excluded from their
liquidity headroom.
Noble Group currently uses $3.4B of borrowing facilities
that are uncommitted.
Noble Group is left with only 1B$ of unutilized committed
borrowing facilities and $900M of cash ready available to meet
$2.966B of debt scheduled in the next 12 months.
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4. 31/1/2016 Noble Group's "Margin Call" Part II: The Enron Moment | Zero Hedge
http://www.zerohedge.com/news/2016­01­10/noble­groups­margin­call­part­ii­enron­moment 5/20
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Source: Noble Group MD&A Q­3 2015
Moreover, Noble Group counts on the completion of the Noble
Agri stake divesture to reap $750M, a transaction which may not
be completed by February 2016.
Adding the 1B$ of unused uncommitted borrowing facilities plus
the $750M of Noble Agri and the $900M of cash that Noble claims
to have, Noble is still short by $316M.
With the S&P downgrade, the total collateral margin call on
Noble Group could be as much as $3.4B, banking facilities
that are uncommitted and contingent on the ability of maintaining
their investment­grade rating.
Noble will have its Enron Moment.
Enron's bankruptcy occurred on November 2001 and was
triggered by S&P's downgrade of its debt below investment
grade, activating a call provision in some loan indentures with
principal amounts totaling $4 billion, cash and liquidity that
suddenly Enron didn’t have.
After the quick sale of Noble Agri, Noble’s core business remains
its coal & energy – two very depressed commodities for the
foreseeable future, and with no cash­flows to pay its debt and a
sudden tightening of the credit, the trader is a cancer patient on
the forward curve.
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