Noble Group's stock endured a roller-coaster ride yesterday as investors weighed concerns about the commodity trader's ability to sustain its business and meet debt obligations, with comments from the company that it remains in talks with potential strategic partners.
Noble shares sank as much as 11.5 cents to 30.5 cents in the opening minutes and later plunged 27 per cent to the lowest since 2000, before reversing to jump as much as 15 per cent. The stock ended the day 3.5 cents lower at 38.5 cents.
At its nadir, the switchback ride cut the Hong Kong-based firm's market value to below $500 million from $2.2 billion at end of last year.
Once Asia's biggest commodity trader, Noble's crisis deepened after S&P Global Ratings flagged on Monday a risk of default, triggering the rout in its shares.
In a statement before yesterday's open, Noble said talks with possible partners were ongoing but did not identify any firms. It also said it is reviewing its options with advice from Morgan Stanley and Moelis & Co, and continuing to evaluate further asset sales and cost reductions.
The firm's co-chief executive officers told staff the company is facing an "incredibly difficult environment" and the trader needs to continue to be conservative and manage for liquidity, according to a memo seen by Bloomberg yesterday.
Noble Group's conversations with core banks are continuing, and the impacts of the S&P downgrade would be minimal as the company is already operating within a "constrained environment", Mr Jeff Frase and Mr William Randall said.
The swing in Noble's share price came as at least four local brokerages placed some restrictions on trading in the shares.
Noble Group has endured two turbulent years marked by losses, asset sales, and accusations of improper accounting which it has denied.
The trigger for the latest spiral downwards was a profit warning for the first quarter on May 9.
Following the announcement of the loss, S&P, Moody's Investors Service and Fitch Ratings all cut the company's ratings and flagged concern about its funding.
Noble's crisis centres on its liquidity. As the company tries to find an investor, it is holding talks with banks on renewing a $2 billion facility that underpins its oil business and is due to expire next month.
Noble is likely to reduce the size of that facility as at least two banks plan to withdraw, according to a person familiar with the matter, asking not to be identified discussing internal affairs.
In another blow, Reuters had reported on Monday that Sinochem Group is no longer pursuing an investment. In its statement, Noble referred to that report. The article "indicated the reasons for any transaction not proceeding were commercial concerns about Noble", it said.
"Noble is not aware of any reason that would confirm what the article reports." In Singapore, KGI removed the company from a list of local stocks eligible for margin financing from yesterday, while Phillip Securities, Lim & Tan Securities and UOB Kay Hian now require cash upfront for purchase amounts exceeding certain limits.
S&P said there is potential the company will face a non-payment of its debt over the next 12 months, adding that its capital structure is not sustainable. In its assessment, Moody's highlighted a US$900 million (S$1.25 billion) gap between estimated liquidity headroom and debt due by the middle of next year.
The firm's existing shareholders include China Investment Corp, the nation's sovereign wealth fund.
"The story for Noble continues to remain fundamentally weak," Mr Nicholas Teo, a trading strategist at KGI Securities, said in a note.
"Liquidity concerns will continue to plague them as they scramble to meet upcoming debt obligations."