Noble's troubles seep into its bonds: Markit
NOBLE Group's troubles have spread from its stocks into its bonds, according to Simon Colvin, a research analyst at financial information services Markit.
Mr Colvin said accusations of accounting irregularities and the continuing global commodities slump have seen the credit markets turn bearish on the Hong Kong-based commodities group.
Noble's Certificates of Deposit's (CDS) spread has tripled in the last 12 months. The latest 5 year CDS spread stands at 714bps, the highest level since 2009.
"This jump came in two waves which occurred in March, when Iceberg's allegations first came to light, and July when the commodities slump started in earnest,'' he said.
The bearish sentiment seen by Noble's CDS spread has also been felt by Noble's bonds, which have seen their yields shoot up in recent weeks. The entirety of the firm's yield curve has widened in the last 12 months, according to Markit's evaluated bond service.
Markit noted that the widening has been most extreme at the long end, where the 30 year yield recently jumped above the 8 per cent mark for the first time ever in the closing week of July. This means that Noble's longest dated bond, the 6.95 per cent 2045 issue, is now yielding 8.3 per cent after having seen its price fall to 85 cents on the dollar since listing in March, according to Mr Colvin.
"This increased bearish sentiment towards Noble's bonds could limit the firm's strategic options going forward as both the equity and debt portion of its balance sheet have come under pressure,'' the analyst said.
Noble has lost more than half of its market value since February this year when Iceberg Research questioned its accounting policies as well as criticised the firm's poor disclosure and lack of transparency.
Noble eventually engaged PricewaterhouseCoopers (PwC) to review the valuation of its contracts. On Monday, PwC said "Noble has adopted an approach to valuations which is consistent with the relevant criteria in all material respects".
But the assurance provided little comfort to the market, which continued to sell the stock. Critics said the PwC review revealed nothing new and failed to address major concerns. The controversial accounting treatment and valuation of its Australian subsidiary Yancoal was not covered at all by PwC.
At 11:11am on Thursday, Noble was trading around S$0.50 a share, down half a Singapore cent, or almost 1 per cent. More than 36 million shares changed hands.
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