SINGAPORE/HONG KONG (REUTERS) - Singapore-listed Noble Group is set to clinch about US$3 billion (S$4.1 billion) in bank credit, sources close to the matter said, in a move that will help Asia's biggest commodity trader to overcome a major refinancing hurdle this year.
But the company could end up paying one of the highest interest rates in its existence because lenders are wary following the downgrade of its credit ratings to junk by Standard & Poor's and Moody's.
Noble reported its first annual loss in nearly 20 years in February, battered by a US$1.2 billion writedown for weak coal prices.
The company, which chairman Richard Elman built up over three decades into a leading trader of oil, coal and iron ore, has been hit by an accounting dispute and the rout in commodity prices. Its shares fell by 65 per cent last year.
As part of the credit facilities, Noble is to pay an interest rate of 225 basis points over the US dollar Libor on a US$1 billion one-year unsecured loan, more than twice the 85 basis points it paid just a year ago, the sources said.
The interest rate will be the highest for a one-year loan in Noble's history in Asia, according to Thomson Reuters.
Noble is also set to seal a credit facility of about $US2 billion backed by trade flows and inventories, with an announcement expected this week, said the sources, who declined to be identified as the discussions are private.
Noble, which reports results on Thursday (May 12), declined to comment.
The sources also said the number of lead arrangers on the unsecured loan was eight banks, which compared with 15 on a loan last year.
Societe Generale, Mitsubishi UFJ Financial Group, ING and HSBC are among the lead arrangers on the transaction, the sources said. The banks declined to comment.
Noble hit the spotlight in February 2015 when it was accused by Iceberg Research of overstating its assets by billions of dollars. Noble rejected the claims and board-appointed consultants PricewaterhouseCoopers found it had complied with international accounting rules.
But since then, chief executive Yusuf Alireza has steered Noble to sell assets, cut business lines and trim debt and taken writedowns.
His strategy is now to try to rely more on relatively low-cost secured financing instead of higher-cost unsecured credit.
"In the 24 years that I've been in the markets, I have to say it's probably the most difficult of those 24 years," Mr Alireza told shareholders last month.
The focus on short-term debt and secured financing is, however, increasing Noble's risk profile and could reduce its financial flexibility, rating agency Fitch said last week when it placed the company on watch for a potential downgrade to junk.
Noble's efforts to restore investor confidence have been complicated by the loss of its investment grade ratings.
"The key reason we decided to get out of Noble was the fact that most financing Noble has obtained from banks in the past was tied to its investment grade ratings," said Sergey Dergachev, senior portfolio manager at Union Investment Privatfonds' fixed income team.