Noble issues detailed rebuttal to US short seller Muddy Waters

SINGAPORE - Singapore-listed Noble Group Ltd, issued on Friday a long and detailed rebuttal to allegations made the previous day by US short seller Muddy Waters.

Noble shares on Thursday dived to an 18-month low after Muddy Waters Research Group alleged that the commodity trader "exists solely to borrow and burn cash." This was the second attack on Noble in recent months after allegations of false accounting by Iceberg Research.

In a press release before the Singapore stock market opened on Friday, Noble categorically rejected the allegations made by Muddy Waters "as inaccurate, unreliable and misleading."

Its shares fell on opening on Friday, trading down 2.5 cents or 2.9 per cent at 83.5 cents at 9:20am. They closed down 5.5 per cent at 86 cents on Thursday.

Here's a summary of Noble's rebuttal:

1. We categorically reject the assertion that Noble exists to borrow and burn cash.

In fact, our balance sheet has never been stronger. Furthermore, the time period of 20 years eferenced by Muddy Waters has seen Noble grow from a company with US$377 million of revenue to revenues of more than US$85 billion.

Muddy Waters has also omitted the impact that the Agri business has had on Group results over the last few years and most importantly, the Free Cash Flow metric quoted in their report incorrectly omits the approximately US$3.4 billion of cash proceeds received from the sale of our 51 per cent interest in Noble Agri. This is an important omission given that over the past several years, the Group has made significant investments in its Agricultural Platform, which we substantially recouped through the sale at a premium to book value.

2. We categorically reject the notion that Noble's debt levels are unsustainable.

Our balance sheet has never been stronger or more liquid. As at the end of December 2014, our debt to capitalizations was at a historic low of 38 per cent. Also we carried US$5.2 billion of liquidity headroom. In terms of our debt profile, half of the outstanding debt has a maturity of over 2 years.

3. We categorically reject the assertion that Intra Quarter Debt levels increase by +US$3 billion.

We acknowledge that our debt does fluctuate intra-quarter, however this is more a reflection of market practice, and nowhere near the +US$3 billion claimed.

4. We categorically reject the unfounded allegations that Noble misled investors or manipulated the accounting in the acquisition and disposal of PT Alhasanie (PTALH).

The acquisition and disposal proceeds of PT ALH, and the accounting of them, are fully explainable through arms length commercial arrangements and third party independent


Through arms length commercial arrangements, going back to 2003, Noble secured long term off take arrangements by assisting in the development of various mines in the Sanga Sanga River area on the Mahakam River in East Kalimantan, Indonesia. As regulatory and market changes developed over time, Noble acted accordingly to protect this investment and the interests of both shareholders and clients.

It is worth noting that since Noble's involvement in the asset, Noble has realized over US$40 million in direct cash gross profits on sales from this mine, underpinning the asset value.

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