Noble shares soar after last-minute debt lifeline, worries persist


UPDATE 3-Noble shares soar after last-minute debt lifeline, worries persist

* Secures four-month credit line extension -source
    * Asked to find strategic investor -source
    * Shares rise almost 50 percent
    * Extension seen as temporary fix

 (Adds detail on bonuses, updates share price)
    By Umesh Desai and Aradhana AravindanHONG KONG/SINGAPORE, June 19 (Reuters) - A four-month credit
extension for cash-strapped Noble Group Ltd <NOBG.SI> sent the
commodity trader's shares up almost 50 percent on Monday, though
traders, analysts and industry sources warned the reprieve was
likely to be only temporary.
    The Singapore-listed firm on Friday persuaded banks to
extend a $2 billion credit line, due to be rolled over by the
end of this week, but it was asked to find a strategic investor,
a person familiar with the matter told Reuters. [nL3N1JD3EI]
    Noble, which has been seeking a cash injection for months,
declined to comment on the credit line.
    "Any roll over is significant, purely because it allows this
company to function for another four months," said trading
strategist Nicholas Teo at KGI Securities Singapore.
    "It doesn't mean (Noble) is completely clear."
    Noble's decimated stock soared, closing up 46 percent at
just under S$0.48. While this is the biggest percentage gain in
18 years, the value of the stock is still only a fraction of its
2011 peak price of about S$17($12.30).
    At its height, Hong Kong-based Noble was Asia's largest
commodity trader, a powerhouse in coal and oil to rival larger
European players like Glencore <GLEN.L>.
    Questions over its accounting and the sharp downturn in
commodity markets since 2012, however, have left the company
struggling to meet its debt obligations, and forced to
dramatically reduce the scale of its operations.
    Scrambling to secure its short-term future beyond its debt,
Noble has also sought to do more to retain its key asset - the
people who account for the bulk of its revenue - turning to cash
payments for those who agree to stay for the next six months.
    The company has in recent days converted 2016 cash-and-share
bonuses into all-cash payouts for experienced traders and
analysts who commit to remaining in place until the start of
December, company sources told Reuters.
    "Noble has now approached me and my desk colleagues and
offered to convert the bonus into a full cash payment. In
return, I committed to stay until at least December 1," one
senior trading source said on condition of anonymity, as he is
not permitted to discuss his contract.
    Noble did not comment on the payments.

    Trust is key in commodities trading, and Noble's ability to
trade depends almost entirely on having enough trust in the
market for counterparties to engage with it in multi-million
dollar deals that can take months to execute and pay out.
    In the physical market, especially coal where Noble remains
a major global supplier, traders within Noble and also with
several of its counterparties said that Noble was working.
    But in derivatives, credit lines are key and industry
sources said Noble was having a tougher time.
    "Unless they solve their credit situation without term
limits (like the current four months), I can't engage with them
in new deals," said one source with a competitor.
    Noble, which has stood by its accounts, surprised investors
this year with a first-quarter loss, prompting credit-rating
firms to fret. [nL4N1IP16X]
    Noble bonds due in 2022 <XS157733877=TE> traded half a point
lower at 37/39 cents on the dollar on Monday, while its credit
default swaps <NOBG5YUSAC=MP> continued to imply a high default
probability of 94 percent.
    "First, it is only four months and gives the company limited
breathing room," said Todd Schubert, head of fixed income
research at Bank of Singapore. "Also, we do not know either the
pricing/terms of the extension."
    Noble's refinancing schedule was a top concern in the
market, reflected in its perpetual bonds <BM107907602=> trading
at 15/17 cents on the dollar.
    Coupon payments on the perpetual bonds are due later this
month. Noble can defer payments without triggering a default
under the bonds' terms, though the market would take a dim view.
Coupon payments on other bonds are due in July and September.
    "What little hope remains is based on some form of white
knight investor coupled with asset sales," said Rick Mattila,
strategy head at MUFG Securities Asia.
    "But clearly market pricing of bonds implies an expectation
of default and restructuring at this point."
 ($1 = 1.3824 Singapore dollars)

Noble Group CDS curve
Noble Group default probability
Noble creditors agree to debt lifeline - source    [nL3N1JD3EI]
Noble Group's woes deepen as S&P warns on debt risk, stock
plunges    [nL4N1IP16X]
 (Reporting by Umesh Desai in HONG KONG, Aradhana Aravindan and
Henning Gloystein in SINGAPORE, additional reporting by Miyoung
Kim; Editing by Edwina Gibbs, Christopher Cushing and Himani
 ((; 65 6870 3026; Reuters


This article appears in: Stocks , Politics
Referenced Symbols: GLEN

More from Reuters


See headlines for GLEN

Follow on:

Research Brokers before you trade

Want to trade FX?