HONG KONG/SINGAPORE • A four-month credit extension for cash-strapped Noble Group sent the commodity trader's shares up by almost 50 per cent yesterday, though market watchers cautioned that the extension was only temporary respite.
The Singapore-listed firm persuaded banks to extend a US$2 billion (S$2.77 billion) credit line, due to be rolled over by the end of the week, but was asked to find a strategic investor, a person familiar with the matter told Reuters last Friday.
Noble declined to comment on the credit line.
Investors applauded the news, pushing Noble's stock up by 15 cents, or 46.2 per cent, to close at 47.5 cents.
But that price is in stark contrast to its 2011 peak of about $17, before a drop in commodity prices and questions over accounting practices sent the stock plummeting.
The trader, which stood by its accounts, surprised investors this year with a first-quarter loss, after which credit-rating firms questioned Noble's ability to repay debt.
"Any rollover is significant, purely because it allows this company to function for another four months. But this (the banks) is just one of the different stakeholders," said trading strategist Nicholas Teo at KGI Securities Singapore.
"It doesn't mean (Noble) is completely clear."
The commodity trader needs to show stability when reporting its next set of earnings, Mr Teo added.
"While it is certainly a positive-sounding headline, I am not sure it is the grand type of event that will arrest the negative momentum afflicting the company," said Mr Todd Schubert, the head of fixed income research at Bank of Singapore.
"First, it is only four months and gives the company limited breathing room. Also, we do not know either the pricing or terms of the extension."
Coupon payments on other bonds are due next month and in September.
"With at least US$1.5 billion in unsecured debt due in the first half of 2018, it is clear that internal cash generation will be insufficient," said Mr Rick Mattila, the strategy head at MUFG Securities Asia.
"What little hope remains is based on some form of white knight investor coupled with asset sales, but clearly market pricing of bonds implies an expectation of default and restructuring at this point."