Noble Group's misery deepens as shares sink to lowest since 2000

Noble Group. signage sits on display outside during an investor day in Singapore.
Noble Group. signage sits on display outside during an investor day in Singapore.PHOTO: BLOOMBERG

SINGAPORE (BLOOMBERG) - Singapore-listed Noble Group's shares extended their decline to the lowest level since 2000 amid rising investor concern that the embattled commodity trader may not be able to engineer a turnaround even as it presses on in talks with core banks to try to secure more funding.

The stock tumbled as much as 11 per cent to 28.5 Singapore cents and traded at 30 cents at 10:58am heading for the sixth drop in seven sessions. The shares have sunk 82 per cent this year, cutting the group's market value to S$394 million. The company has about US$2.1 billion (S$2.9 billion) of debt obligations due by the end of 2018, according to data compiled by Bloomberg.

An external media spokesperson for Noble Group declined to comment.

The crisis at Noble Group has intensified this month ahead a critical funding deadline, with a borrowing base facility due to expire. The company - which has been battling losses and ratings downgrades for more than two years - is asking lenders to extend the US$2 billion facility until the end of the year, according to a person with knowledge of the discussions. If agreed, that would hand co-chief executive officers Will Randall and Jeff Frase more time to sell additional assets or persuade a strategic investor to come on board.

"It's all up to their ability to refinance this month," Nicholas Teo, a trading strategist at KGI Securities Pte, said by phone, referring to the borrowing base facility. The stock could slump to 10 cents or even lower if the company can't negotiate a deal for an extension, Teo said.

Ratings agencies have cut their scores on the company further in the past month, expressing concern about the possibility Noble Group 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.

The company's core banks have hired law firm Clifford Chance to advise them amid crisis talks over the credit facility that expires this month, according to a person with knowledge of the discussions. Noble is asking banks to extend the facility to the end of the year, as well as negotiating new covenants on its bank debt, said the person.

The moves signal the company and its banks are preparing for protracted negotiations over the trader's future. Noble has hired Chicago-based law firm Kirkland & Ellis LLP as legal counsel, Bloomberg reported last week, after appointing Morgan Stanley and Moelis & Co to review its options.

Prices for Noble's shares and bonds have tumbled in recent weeks after the trading house reported a shock US$129 million quarterly loss in May. On Friday, its bonds due in 2020 fell to a record low of 37 cents on the dollar, while its revolving credit facility due in May 2018 traded at 50 cents on the dollar last week.

The surprise loss announced last month capped two turbulent years for the company, once Asia's largest commodity trader, marked by losses, asset sales, and accusations of improper accounting. Its market capitalization has fallen from a peak of more than US$10 billion to less than US$500 million.

Noble last month appointed Paul Brough, a restructuring specialist who worked on the liquidation of Lehman Brothers, as its chairman, replacing founder Richard Elman.

"Pricing of unsecured bonds and loans reflects the market perception that probability of default is high," said Rick Mattila, international head of market strategy at MUFG Securities Asia. "Despite that, banks may be willing to refinance secured credit facilities."