* Noble negotiating rollover of credit facilities with core
* Company's shares and bonds slump after profit warning, Q1
* Moody's, Fitch cut ratings on Noble, flag risks
(Adds details of financing in paragraphs 11-12)
By Anshuman Daga and Umesh Desai
SINGAPORE/HONG KONG, May 18 Singapore-listed
Noble Group faces a major challenge over the next few
weeks as it negotiates a rollover of credit facilities against
the backdrop of a shock quarterly loss that pummelled market
confidence in the commodity trader.
A $2 billion credit facility, secured on its inventories and
working capital, is due to be rolled over by the end of June.
Noble has already drawn about $620 million cash from the
"We are starting to talk to the core participant banks about
a new borrowing base facility which would again feature a cash
draw down component," Noble said in response to a query from
Short-term financing is the lifeline of trading houses which
operate on thin margins and rely on such funding to support
their working capital needs. For Noble, obtaining such financing
has become challenging due to its weak operating performance.
"The June refinancing is paramount to the company," said
Andrew DeVries, an analyst at independent financial research
firm CreditSights, adding a bank would normally be comfortable
loaning $600 million-$700 million on a secured basis because
Noble's trading book and inventory are worth $4.6 billion.
"However, the recent drop in the stock and bonds combined
with a Moody's downgrade is enough to scare a lot of banks away
from further Noble business, regardless of collateral value,"
said New York-based DeVries.
Noble has lurched from one crisis to another since it hit
the spotlight in February 2015 when Iceberg Research accused it
of overstating its commodity contracts by billions of dollars as
it battled a commodities downturn.
That sparked a share price collapse, writedowns and debt
downgrades to junk status, forcing it to sell assets, raise $2
billion and cut jobs. Noble has rejected Iceberg's claims and
has stood by its accounts.
Noble's shares slumped by as much as 57 percent to the
lowest in 15 years and its bonds due 2022 lost
half of their value, following an unexpected quarterly profit
warning last week.
Ample access to credit is an essential business requirement
for commodity merchants as single supply deals for products like
oil or coal span months or even years covering huge volumes
worth hundreds of millions of dollars.
The discussions with banks on the credit facilities are
taking place at the same time as Noble kicks off a strategic
review of its businesses under new chairman Paul Brough, while
also exploring "strategic alternatives".
How these moves pan out would also determine the amount of
credit facilities that would be rolled over, a source familiar
with the situation said on Thursday. The person said Noble is
working with European and Asian commodity lenders on the
Noble's market value has shrunk to about S$919 million ($661
million) from about $6 billion in February 2015.
Some analysts said the company faces a big challenge to turn
around its operating performance.
"Noble has talked of its business as a brokerage business
capable of delivering profits despite direction of commodity
markets," said Rick Mattila of MUFJ Securities, adding the
trading loss raises questions about its ability to "deliver
results on a consistent basis."
Moody's Investors Service cut Noble's rating further into
junk territory this week, and Fitch Ratings downgraded its
long-term rating on Noble, blaming weak returns.
"The downgrade reflects heightened concern over Noble's
liquidity stemming from its weak operating cash flow and large
debt maturities over the next 12 months," said Gloria Tsuen, a
senior analyst at Moody's.
The company's next challenge is debt of $1.5 billion due
"We are likely to take further negative rating action if
Noble does not work toward addressing the 1H18 debt maturity in
the next three to six months," Fitch said.
($1 = 1.3910 Singapore dollars)
(Reporting by Anshuman Daga and Umesh Desai; Additional
reporting by Henning Gloystein; Editing by Muralikumar