THE difficulties facing Noble Group, a beleaguered Hong Kong commodities trader, are multiplying. On May 23rd the firm was forced to suspend trading of its shares in Singapore after their value slumped by more than 28% in half an hour. The panicked selling came after S&P Global, a ratings agency, warned that Noble was at risk of defaulting on large debt repayments that are due within the next 12 months. Investors were also rattled by reports from Reuters and the Financial Times suggesting that Sinochem, a Chinese conglomerate at one time tipped to take a stake in Noble, had lost interest in a deal.
Founded in 1986 by Richard Elman, a former scrap-metal merchant from London, Noble grew from an initial investment of $100,000 to be worth more than $10bn at its peak in 2010. But investors took fright in 2015 when a previously unknown group called Iceberg Research began publishing reports questioning Noble’s accounting practices (Noble has vigorously defended its book-keeping, and said a disgruntled former employee was behind the criticism). This controversy only made it tougher for the group to weather a global slump in commodity prices: over a calamitous two-year period the company has shed more than 90% of its value (see chart).
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Of late, however, Noble had appeared to be making some progress towards recovery. It has been narrowing its focus to oil and coal, and selling off interests in agricultural trading and in power, among other sectors. After losing $1.7bn in 2015, the company swung to a small profit last year. But this optimism faded rapidly in early May, when Noble forecast a first-quarter loss of $130m—blamed largely on ill-judged coal trades—and warned that it might not return to profitability until 2019. Since then, ratings agencies—Moody’s and Fitch, as well as S&P Global—have all cut Noble’s credit rating, already classed as junk.
Noble’s share price tumbled further when trading of its stock restarted on May 24th before recovering to finish the day down by 8%. But the drama has drawn more attention to negotiations over a $2bn credit facility which the group needs to finance its operations, and which has to be renewed or replaced at the end of June. The speculation is that Noble’s first-quarter losses have been scaring banks away.
Mervin Song, an analyst at DBS Vickers, guesses that Noble’s lenders will choose to “kick the can down the road”. But, says Margaret Yang of CMC Markets, a brokerage, in the longer term the group needs to find a “white knight” investor to take a stake. Noble has been looking for a saviour, and in a statement to the market on May 24th said that discussions with “various potential strategic parties” were in progress. It did not identify any of them; nor has it ever commented directly on talk of a tie-up with Sinochem. Sealing a deal is presumably the highest priority for the group’s new chairman, Paul Brough, a well-regarded troubleshooter who replaced Mr Elman on May 11th and is reviewing the company’s options. He may not have long to find an answer.