Noble 'in talks to boost liquidity with secured finance'

Noble Group is talking to its banks about shifting the way it finances itself, by pledging commodity inventories to guarantee some debt, four people with knowledge of the matter have told Bloomberg.

The use of secured finance, a system used by several of Noble's competitors, could help the commodity trader to boost its liquidity, thus reassuring the market.

The Singapore-listed company is holding conversations with some of its lenders about raising secured credit lines as a way to increase its liquidity, Bloomberg reported, citing unnamed sources. The talks are preliminary and could end without a deal, the sources said.

Noble shares have lost more than half of their value in Singapore trading since mid-February, when a group calling itself Iceberg Research criticised the firm's accounting practices. Others, including short-seller Muddy Waters LLC, have since joined in the scrutiny.

Noble Group chief executive Yusuf Alireza told shareholders on Monday that the company had been approached by banks about potential "financing packages".

It had US$15.2 billion (S$21.4 billion) in committed and uncommitted credit lines at the end of the first half of the year.

Fitch Ratings said yesterday that Noble's second-quarter results reflect a stable financial profile, despite an increase in debt because of working capital expansion. This will set the stage for stronger generation of operating cash flow in the second half of the year, it added.

Fitch believes Noble can generate positive cash flow from operations in the second half, even though the figure remained negative in the second quarter, coming in at minus US$399 million. This is already better than the minus US$566 million seen in the first quarter, and is driven mostly by the US$707 million increase in working capital.

Separately, Noble Group has filed a summons to compel the alleged authors behind Iceberg Research to file documents for inspection, so the legal case can proceed.

Noble said Mr Arnaud Vagner and Enlighten Ace, a Seychelles-based firm that it has included in the suit, have not responded to requests to commence the discovery phase of litigation by confirming their readiness to exchange the list of documents.

Noble started legal proceedings against Mr Vagner and Enlighten Ace in March for conspiracy to injure, claiming they are behind Iceberg.

A version of this article appeared in the print edition of The Straits Times on August 21, 2015, with the headline 'Noble 'in talks to boost liquidity with secured finance''. Print Edition | Subscribe