Noble faces deadline amid creditors' talks

Whether waiver is extended or not could affect negotiations on debt restructuring

HONG KONG • Noble Group, the embattled commodities trader, faces a key deadline today that could complicate its negotiations with creditors as it wrestles with a US$3.5 billion (S$4.7 billion) debt restructuring.

Lenders had agreed to waive certain rights under terms Noble committed to for its US$1.1 billion revolving credit facility until today.

The company is talking to creditors about a restructuring that includes a debt-for-equity swap, according to people familiar with the negotiations. The big question is whether lenders will agree to extend the waiver.

As Noble fights for survival, global investors will be watching the talks closely.

The decline of Noble, once Asia's largest commodity trader, since 2015 has been marked by losses, concern it will not pay its debt and claims from long-time foe Iceberg Research, including that it inflated the value of some contracts.

While Noble has consistently rejected the claims, some have been validated as Noble has been forced to make write-downs.

"No waiver could mean an acceleration event and push the company into bankruptcy protection or liquidation," said analyst Brayan Lai at credit research firm Bondcritic, adding that the revolving credit facility holders are an important group as the company undertakes restructuring negotiations.

"I suspect they, along with 2018 bond holders, will be pushing for better restructuring terms versus the 2020/2022 bond holders who are further down the pecking order," he said.

Noble said last month that it has started discussions with various stakeholders with the objective of treating them all fairly.

Chairman Paul Brough said last week that he expects an extension of Noble's covenant waiver to be granted, and reiterated that Noble's priority is to stay out of insolvency. He also warned that there will be more pain ahead for the company.

Noble shares lost 13 per cent to 23 Singapore cents, declining for the first time in seven days.

The Singapore-listed firm has been selling assets to raise cash, and shareholders last week approved the sale of its oil unit to Vitol Group.

With restructuring talks having begun, the key issue is the kind of proposal the company would present, according to DBS Group Holdings. "We believe that Noble could get an extension on the waiver pending restructuring talks, or the talks could even proceed without this waiver if lenders feel they don't have much to gain by taking action," said Mr Neel Gopalakrishnan, a senior credit strategist at DBS.

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A version of this article appeared in the print edition of The Straits Times on December 20, 2017, with the headline 'Noble faces deadline amid creditors' talks'. Print Edition | Subscribe