News analysis

Billion-dollar challenge facing Noble's new chiefs

Mr Yusuf Alireza has gone but Noble Group's challenges remain. The commodity trader that announced the chief executive officer's resignation on Monday as yet more assets were put up for sale still faces the hurdle of raising about US$1 billion (S$1.4 billion) to shore up its balance sheet.

Noble is sticking with its plan to raise the funds through redeploying capital from low-return businesses, non-core asset sales and other capital-raising initiatives, an external spokesman for the company told Bloomberg News.

The proposed sale of Noble Americas Energy Solutions (NAES) is an additional step, she said.

Noble has been under intense pressure for more than a year as the commodity rout spurred losses, its credit rating was cut to junk even as it sold its agriculture unit stake to raise funds, and its accounting methods were questioned by critics, including Iceberg Research.

The efforts to turn the company around rest with new co-CEOs William Randall, Noble's president, and Jeff Frase, president of Noble Americas, as well as founder and chairman Richard Elman.

Moody's Investors Service said the loss of Mr Alireza does not affect Noble's junk rating. It also highlighted challenges, saying: "While the capital-raising objectives would be credit positive, if the result is lower leverage, improved liquidity and greater stability, the successful execution of the plan remains uncertain."

Noble shares sank to their lowest close since January on Monday after Mr Alireza's resignation amid concern that NAES was a core asset that contributed to profits.

NAES was one of the company's crown jewels, said Mr Bernard Aw of IG Asia. The shares climbed 7.1 per cent to 30 Singapore cents yesterday, paring this year's loss to 25 per cent after a 65 per cent slump in 2015.

"The disposal of profitable assets is quite troubling news, especially when Noble is supposedly aiming to focus on its energy business," Mr Aw said in an e-mail.

Noble Group reported a US$1.7 billion loss last year, its first in almost two decades, after recording US$1.9 billion in writedowns as it revalued coal contracts and sold its remaining stake in Noble Agri to China's Cofco Corp below its book value.

Last month, Mr Alireza secured fresh financing totalling US$3 billion, while acknowledging that some banks had cut credit facilities by US$1.5 billion in the first quarter, narrowing the company's free liquidity.

At the urging of its banks, Noble Group has also been seeking an equity investor to secure a cash injection.

Noble has already cut back on its metal trading operations to focus on more profitable areas.

"Noble indicates that additional capital-raising is needed, so we would not be surprised to see some form of capital injection," said Morningstar Research in a report. "This could also be an overhang and a concern to shareholders this year."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on June 01, 2016, with the headline 'Billion-dollar challenge facing Noble's new chiefs'. Print Edition | Subscribe