Noble Group restructures debt and opens new trade finance facility
Commodity trader Noble Group is to have US$3.5bn in debt restructured after signing an agreement with senior creditors.
In a statement to the Singapore stock exchange, Noble has announced that an ad hoc group of creditors which hold 46% of its existing debt have agreed to restructure the debt.
In addition, Deutsche Bank, described by the company as “an existing senior creditor and future trade finance provider” has signed up to the restructuring. ING, named as “an existing trade finance provider and fronting bank” is seeking credit approval to sign up. Combined, Deutsche and ING – both big players in commodity finance markets – represent a further 4% of the debt. The ad hoc creditors have not been named.
The restructuring agreement includes the provision of a new three-year committed US$600mn trade finance line and a US$100mn hedging facility. This package is available upon completion of financial restructuring and will be used to develop Noble Group’s commodity trading businesses, the statement says.
It is fully underwritten by the ad hoc group of creditors and Deutsche Bank. Noble has invited creditors that wish to participate in the underwriting for this trade finance facility to respond by April 6.
During the restructuring period, Noble Group’s uncommitted interim trade finance facility remains in place, with Deutsche being added to this facility as an additional trade finance provider.
The company says the restructuring will allow it to focus on its hard commodities, freight and LNG businesses and “solidifying its position as the leading industrial and energy products supply chain manager in the Asia Pacific region”.
However, the trader’s stock has fallen – literally and metaphorically – catastrophically in the three years since Iceberg Research launched a stinging attack on its accounting practices. Hundreds of jobs have been lost as the group sold off parts of its trading business to avert losses.
In October 2016, Noble Group sold off its North American energy distribution unit to the US company Calpine, for just over US$1bn. Six months previously, it sold its agri trading business Noble Agri to Chinese company Cofco for US$750mn.
None of these helped Noble Group avoid having its credit rating downgraded to junk: a humiliating downward spiral for what was once Asia’s largest commodity trader and one of the biggest users of trade finance products.
In February 2015, a little-known company called Iceberg Research released a report casting aspersions on accounting practices at Noble Group. The report stated: “Noble exploits the accounting treatment of its associates to avoid large impairments and fabricate profit.”
It went on to compare the trader to collapsed energy company Enron, which employed around 20,000 staff at the time of its demise in 2001, and fabricated its financial health through systemic and planned accounting fraud.
The report wiped US$1.8bn off Noble’s valuation and the company’s fortunes have been in rapid decline virtually ever since.