Noble selling ethanol producer to new buyer for higher price

Troubled commodity trader Noble Group has found a new buyer for its United States-based ethanol producer.

Mercuria Investments US has offered a base consideration of US$15.5 million (S$21 million) for the unit - US$3 million more than a bid from Zeeland Farm Services.

Noble had said on Nov 27 that it would sell the unit - Noble Americas South Bend Ethanol - to Zeeland Farm for US$12.5 million, plus adjustments for working capital, inventory and debt.

However, Noble told the Singapore Exchange yesterday it had entered into a new agreement on Dec 7 with Mercuria Investments, a unit of Mercuria Energy. This is on the same terms as its Zeeland Farm deal, but with an increase in the base consideration of US$3 million and the deletion of a provision.

Noble is expected to end its agreement with Zeeland Farm next Monday with a termination fee of US$2 million imposed.

If the new deal with Mercuria is assumed to have been completed on Oct 1, the gross consideration would amount to about US$20 million, including a US$15.5 million base consideration, plus net working capital of US$900,000 and an inventory value of US$3.6 million, with no debt for the business as of Sept 30.

Noble is expected to reap net proceeds of about US$18 million from the sale, after deducting the termination fee. It faces pressure to tackle its mounting debt burden amid slipping cash holdings.

It is seeking to sell its global oil liquids business, Noble Americas Corp (NAC), to rival Vitol for US$1.4 billion to help ease debt. And in October, it completed the sale of Noble Americas Gas & Power Corp to Mercuria Energy for US$102 million.

Noble's debt stands at US$3.5 billion, but its cash and short-term deposits (excluding cash balances with future brokers) fell to US$256 million as of Sept 30, from US$467 million three months before.

It reported a net loss of US$1.2 billion for the three months to Sept 30, largely owing to write-downs for net fair-value gains and losses related to the sale of its businesses.

Noble Americas South Bend Ethanol is fully held by NAC, which Noble is selling to Vitol.

"This will allow Noble Group to monetise and realise the value of (the subsidiary) prior to the closing of the sale of the global oil liquids business," Noble said.

The ethanol unit, which owns and operates a production plant in Indiana, had a book value of about US$80.4 million as of Sept 30 and a net tangible asset value of the same amount.

A version of this article appeared in the print edition of The Straits Times on December 09, 2017, with the headline 'Noble selling ethanol producer to new buyer for higher price'. Print Edition | Subscribe