Noble Group's stock fell while its bonds rose yesterday after people familiar with the matter said the embattled commodity trader has approached lenders to replace a credit facility with a new US$2 billion (S$2.8 billion) loan.
Now investor focus shifts to bank support for that lifeline.
Mitsubishi UFJ Financial Group (MUFG) is said to be arranging the new 364-day revolving credit facility, the people said, asking not to be identified because they are not authorised to speak publicly.
Noble chief financial officer Paul Jackaman said last week the company is in talks with lenders over renewing a secured borrowing facility that has been extended to the end of next month. The new loan is to refinance that facility, according to Mr Glenn Ko, head of Asia desk trading strategy at HSBC Holdings.
Noble's stock dropped 2.2 per cent, extending declines for the month to 52 per cent after the company reported last week a net loss of US$129 million in the first quarter. It ended the day at 68 cents.
Noble's 2022 notes rose 3.2 US cents to 55.1 US cents on the US dollar as of 3.50pm in Hong Kong, but they are still down from 98.2 US cents at the start of the month, according to prices compiled by Bloomberg.
Paul Brough, a former KPMG executive, was appointed chairman of Noble last week, taking over from founder Richard Elman. Its credit rating was cut further into junk territory this week.
"The company has always been highlighting strong banking relationships in the past, and even during the tough times they managed to get bank funding," said Mr Raymond Chia, head of credit research for Asia ex-Japan at Schroder Investment Management. "This time round, it could be more uncertain, given that quite a number of things are happening at the same time, including first-quarter losses, new management, timing of those events six weeks after the recent bond sale."
A media representative for Noble Group and a spokesman for MUFG were not able to immediately comment when contacted.
"If the banks are comfortable loaning against the trading book, it would be a huge vote of confidence across the whole capital structure," said CreditSights analyst Andy DeVries. "I assume the banks not only have access to more details on the trading book positions than the public does, but they also have experts that specialise in these positions too."
Noble is offering investors 185 basis points over the London Interbank Offered Rate (Libor) on an US$800 million uncommitted tranche and 195 basis points over Libor on the remaining US$1.2 billion committed tranche, the people said. The deal terms may change, given recent downgrades by rating firms, according to the people.
Fitch Ratings cut its credit rating on Noble deeper into junk territory on Tuesday, saying it will need to source external financing in the first half of next year. That came after Moody's Investors Service took a similar step.
Noble's shares are on course for a third straight day of gains, the longest rising streak since March, after losing almost half their value last week.
The fact that there has not been a spike in pricing on the loan is positive, said Mr Todd Schubert, head of fixed-income research at Bank of Singapore. "However, the loan isn't completed and the market will look to see to what extent terms are modified."