Kay Van-Petersen
Kay Van-Petersen, macro strategist at Saxo Capital Markets, thinks that Australian cheese producer Bega is an interesting trade.
Strategic trade
Trade view / 03 June 2016 at 14:06 GMT

#SaxoStrats: Noble could be set for a turn in fortunes

Fixed Income trader / Saxo Bank
d Background

Following the slump in commodity prices, Noble Group has been forced to restructure its balance sheet. This week the company announced a rights issue, which saw its shares tumble and bonds
jump. The rights issue comes on top of previously announced refinancing of bank credit lines and disposal of several business subsidiaries.

This will go a long way to secure recovery in our view, and has a clear signal of increased shareholder commitment. We believe the new top management will seek to recapitalise the company without inflicting permanent losses on bond holders.

Following the deteriorating business conditions, Noble has been stripped of its Investment grade status. Moody’s recently confirmed its Ba3 rating, while Fitch just recently downgraded it from BBB- to BB+. S&P has been more aggressive in holding a B+ evaluation.

The current pricing however, despite the recent bounce, indicates a far more downbeat outlook as the 11% yield level is significantly worse than B-rated US corporates, which are yielding 5% at this maturity. Hence we believe there is still upside from these levels.

Management and risk description

Key risks include commodity price drops, especially coal, and refinancing initiatives which are holding existing credit investors at a disadvantage. Furthermore, aggressive rate hikes from the Federal Reserve may impact emerging-markets sentiment negatively.


Buy in minimum 100,000 nominal USD with 1,000 nominal USD increments. Return objective is primarily price gain in the short term when the recovery continues or further capital enforcing initiatives are announced.



Source: Saxo Bank, Bloomberg


Source: Saxo Bank, Bloomberg

— Edited by Martin O'Rourke

Non-independent investment research disclaimer applies. Read more

20 June
Denisv Denisv
Good day Michael, today Noble Group 81-82, is it still looking good?
20 June
Michael Boye Michael Boye
Hi Denisv. Obviously the market timing wasn't optimal given the recent Brexit turmoil, and all Emerging Market assets have been vulnerable. Fundamentally, there has been no major news out for Noble, except that S&P has cut its credit ratings to B+. With a 13% yield however, the market is reflecting a much more negative outlook than this, so while acknowledging a higher risk, we still think bond prices could quickly turn around (subject to the Brexit decision of course).


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