Noble sells 2 units as part of debt reduction drive

An employee is reflected on the wall as she walks past a signage of Noble Resources, a Noble Group subsidiary.
An employee is reflected on the wall as she walks past a signage of Noble Resources, a Noble Group subsidiary.PHOTO: REUTERS

Group anticipates about $2.3b net loss for Q2, positions itself for more stresses in sector

Beleaguered commodities trader Noble Group is selling two units to pare debt as part of a strategic review that began in May.

The group expects to report a net loss for the second quarter, to follow on from its first-quarter deficit.

It also said yesterday that it was planning to offload its global oil liquids business and had reached a deal for its North American gas and power subsidiary.

Earlier this year, Noble started a strategic review after Hong Kong restructurer Paul Brough took the reins as chairman amid liquidity woes and a slump in its core business. The board said yesterday that it has made debt reduction a priority over the next two years and added that discussions with lenders are ongoing.

Noble anticipates a net loss of US$1.7 billion to US$1.8 billion (S$2.3 billion to S$2.45 billion) for the three months to June 30, after posting a net loss of US$129.5 million for the first quarter of this year.

Noble noted in its Singapore Exchange announcement yesterday: "The board believes that the commodities trading industry will continue to face both challenging conditions and realignment.

"The group, therefore, is positioning itself for continuing stress in the sector, which the board believes is likely to lead to industry consolidation.

"The operating environment will also continue to impact the industry's access to liquidity as lenders seek to reduce their exposures to the sector."

Its planned sale of the global oil liquids business - Noble's most working capital-intensive operation - is expected to cut reliance on trade finance lines and overall bank funding.

The group is scouting for potential buyers and expects to have final bids in hand this quarter.

It also announced yesterday that wholly owned subsidiary Noble Americas Gas & Power Corp will be sold to Mercuria Energy America under a binding stock purchase agreement valued at US$248 million. It expects to close the sale by the end of the year.

The company has faced its cash troubles by going on a selling spree, most recently disposing of Brazilian electric power subsidiary Noble Comercializadora de Energia and three warehouse subsidiaries last month.

It said yesterday: "To date, the strategic review has explored several alternatives, including the sale of an interest in the group or its subsidiaries or disposals of parts of its business, with a view to maximising value for stakeholders and to best position the group for the challenges and opportunities facing the commodities trading industry."

In an update on the strategic review, Mr Brough added: "The progress (on actions being taken)... to deal with the group's borrowings provides us with a realistic prospect of dealing with the group's liabilities in an optimal manner. The group has now embarked on this path, but remains open to proposals from potential investors."

Noble shares closed down 1.5 cents, or 2.54 per cent, to 57.5 cents yesterday.

A version of this article appeared in the print edition of The Straits Times on July 27, 2017, with the headline 'Noble sells 2 units as part of debt reduction drive'. Print Edition | Subscribe