Noble shares down to lowest since 2000

Commodity trader Noble, which has been battling losses for more than two years, has been focusing its efforts on creating a smaller and nimbler company to generate sustained returns.
Commodity trader Noble, which has been battling losses for more than two years, has been focusing its efforts on creating a smaller and nimbler company to generate sustained returns.PHOTO: BLOOMBERG

Embattled trader seeking to extend credit facility as stock plunges 82% to date this year

Noble Group's woes are far from letting up as shares of the embattled commodity trader sank to their lowest level since 2000 yesterday.

The counter slumped as much as 11 per cent in morning trade before closing at 31.5 cents - 1.6 per cent or half a cent lower than Monday's close and down a massive 82 per cent to date this year.

The sell-off was triggered by investor fears that the company may not be able to engineer a turnaround even as it presses on in talks with core banks to try and secure more funding.

The share price drop has left Noble's market capitalisation at just $413.5 million, compared with $1.54 billion a year ago.

A Bloomberg report on Monday, citing an unnamed source, said Noble is asking lenders to extend till the end of the year a US$2 billion (S$2.8 billion) credit facility that expires this month. The firm has about US$2.1 billion of debt obligations due by the end of 2018, according to Bloomberg data.

An extension of the credit facility would give Noble more time to find new investors, sell assets or close unprofitable businesses. The group, which announced a strategic review last month, counts China's sovereign wealth fund, China Investment Corp, among its shareholders.

When asked for comment, Noble's external media representative only referred to the group's latest earnings call, when chief financial officer Paul Jackaman said the company "continues to be in discussions with its banks to ensure that the group's facilities provide the liquidity required to support the structure of the group's businesses going forward".

Still, KGI Securities Singapore trading strategist Nicholas Teo said in the Bloomberg report that Noble's share price could slump to 10 cents or even lower if the company is unable to negotiate a deal to extend the credit facility. "It's all up to their ability to refinance this month," he said.

Mr Roger Tan, chief executive of Voyage Research, told The Straits Times: "Since firms like Noble rely on debts to do business, any activity that affects the perceived stability of the company will have an impact on its lenders' confidence, and this could lead to shaky business operations.

"Noble will need to provide proof that they can pay their debts if they want to renew or extend any loans."

Noble, which has been battling losses for more than two years, posted a net loss of US$129.3 million last month for the first quarter ended March 31, compared with a net profit of US$40.5 million in the same period a year ago.

Ratings agencies have cut their scores further on the company in the past month, expressing concern that it may not meet its obligations. S&P Global Ratings has said the trader's debt load is unsustainable given its current earnings path, and also flagged a risk of default.

DBS analyst Mervin Song, however, believes that Noble should be able to refinance its credit facilities, albeit smaller in size and with higher borrowing costs, as long as China Investment Corp remains a shareholder.

"In addition, by lending on a secured inventory basis, we believe the various banks should have sufficient collateral to continue backing Noble," Mr Song wrote in a recent report.

Noble recently appointed Mr Paul Brough - a restructuring specialist who worked on the liquidation of Lehman Brothers Holdings - as chairman to spearhead the strategic review of the business.

The group has been focusing its efforts on creating a smaller and nimbler company to generate sustained returns. Its cost-reduction initiatives, for example, saw selling, administrative and operating expenses shrink about 45 per cent to US$91 million during the quarter.

A version of this article appeared in the print edition of The Straits Times on June 07, 2017, with the headline 'Noble shares down to lowest since 2000'. Print Edition | Subscribe