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Noble Group Faces 11th Hour Oil-Unit Sale as Stock Is Halted

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October 20, 2017

Photo: G-Valeriy / Shutterstock.com

By Jasmine Ng and Lianting Tu (Bloomberg) — Noble Group Ltd. suspended its shares from trading in Singapore on Friday pending the announcement of a major transaction, with the commodity trader seeking to clinch a sale of its oil-trading unit in a deal that may be critical to the company’s prospects for survival.

The stock was halted at 38 Singapore cents, 2.6 percent lower, after the Hong Kong-based company’s announcement, which was released just after midday in the city-state, and didn’t give details of the planned deal. The shares have sunk 78 percent this year amid concerns that Noble Group will default.

The trader has been locked in a crisis than spans the past two years, and executives have embarked on a shrink-to-survive strategy by selling units to meet obligations. The oil-trading business is among the most valuable assets that remain, and earlier this week Vitol Group confirmed that while it was in talks over the potential disposal, no deal was certain. Noble Group has a covenant waiver on a $1.1 billion credit facility that will expire at the end of this week unless the company can secure an agreement to extend it.

“The company’s fundamentals haven’t improved, and they keep selling their core assets to get liquidity,” Margaret Yang, a strategist at CMC Markets, said by phone. “There might be an update on the sale of the oil business.” She added: “Whether or not the deal will go through, and the selling price is important — those are the two things people will be looking at.”

Vitol Chief Executive Officer Ian Taylor told Bloomberg TV on Wednesday the negotiations to buy the unit are “very complicated.” He said: “We’re engaged; we have been talking.” Vitol is the world’s largest independent oil trader.

Noble Group had total debt of $4.6 billion at the end of June, with about $2 billion maturing by June 30 next year, according to Bloomberg-compiled data. Its 2020 notes have plunged by about 58 cents on the dollar since the beginning of May. On Friday, the bonds rose 0.5 cents to 36.9 cents at 1:30 p.m. in Hong Kong, Bloomberg-compiled prices show.

Bankruptcy Risk

The company, which was founded by Richard Elman, has been under increasing pressure since May, when a surprise loss compounded the long-running crisis. The company has already warned of the risk of bankruptcy at two of its major subsidiaries in accounts filed in recent weeks in the U.K. and Singapore.

Should the oil unit be sold, Noble Group will be left with a largely Asian portfolio, including marketing rights to Indonesian coal, LNG trading, and stakes in Australian and Mongolian coal mines. It also has an alumina refinery in Jamaica. Among the oil unit’s businesses is a contract for shipping via the Colonial pipeline, the biggest conduit for moving fuel from the U.S. refining centers of Texas and Louisiana to high-demand East Coast markets.

Among earlier disposals as Noble Group sought to contain its crisis, the company agreed to sell its North American gas-and-power business to Mercuria Energy Group Ltd., as well as its U.S. energy-solutions unit to Calpine Corp. The trader also sold off its agricultural commodities business.

© 2017 Bloomberg L.P


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