Iceberg, Moody's raise doubts over Noble's energy asset sales

Singapore

ICEBERG Research on Thursday poured cold water over Noble Group's plans to sell its US energy units, saying that these will not resolve the crisis it is in.

It also had harsh words for the Singapore Exchange (SGX) and the Monetary Authority of Singapore (MAS), accusing both of having failed as regulators for not taking any action against Noble.

In a post on its website, Iceberg - which Noble has said is helmed by a disgruntled former employee - said that "Noble is sinking in a perfect storm".

Noble last week announced radical plans to dispose of its profitable energy business units to pay off debt, and warned of a possible loss of as much as US$1.8 billion for the second quarter.

The financially beleaguered group said that it was selling its North American gas and power operations to Mercuria Energy America for US$248 million, and is also putting on sale its global oil liquids business. The proceeds from these will be used to repay as much as US$3 billion in credit facilities linked to these operations, as well as the group's remaining debt.

Iceberg said that the sale of these businesses would not solve the crisis for Noble. "The previous sale of Agri, Energy Solutions only borrowed time. The company is walking towards bankruptcy and liquidation. Its cost of fund is prohibitive.

"Noble is losing the confidence of its counterparties and of its banks. Key traders are leaving."

Noble last week said that it expected access to working capital and trade finance support to be restricted. The group has formed a partnership with Mercuria Energy Group to improve access to trade finance facilities in Asia.

It is still looking for an investor to recapitalise its hard commodities business, and is seeking more strategic alliances to fund working capital and other capital requirements so that it can maintain and grow trading volumes.

Iceberg, turning its attention to SGX and MAS in the second half of its post, said that the Noble saga had revealed the "complete failure" of the regulators in Singapore.

It noted that the SGX had issued only "trade with caution" notices and mentioned that it was closely monitoring the situation. "The passengers of this Titanic will be relieved that the coast guards are closely monitoring the situation while they are swimming in freezing water," said Iceberg.

SGX and MAS should not have allowed Noble to raise more money on a balance sheet that has attracted questions over its veracity, it added.

SGX said in response that it had consistently applied the same approach to companies that were the subject of negative commentary.

"The company has the right of first reply and should respond as quickly and comprehensively as possible," said an SGX spokesman. "We will review the company's response to see if they have addressed all the points of concern. However if the response is inadequate, we will query the company or oversee the appointment of a third-party professional to ensure proper disclosure to the market."

The exchange would, at the same time, review the negative commentary to see if it contains false or misleading statements that warrant a referral to the relevant authorities, she added.

MAS was not able to respond by press time.

Meanwhile, credit rating agency Moody's, in a report on Thursday, said that Noble's profit warning for the second quarter is credit negative and increases the challenges that the firm faces.

"The company's forecast of deteriorating second-quarter financial results will keep default risk elevated," said Moody's. "Although the company plans to dispose of key assets to reduce debt, it is uncertain whether these sales will raise sufficient proceeds to meet its US$2.1 billion of debt maturities over the next 12 months."

It noted that Noble had a liquidity buffer of about US$1.2 billion as at March 31; the group has US$600 million of debt due in the remainder of this year and US$1.5 billion due in the first half of next year.

"This headroom also may have narrowed meaningfully as a result of the sizeable second-quarter loss," said Moody's, warning that Noble faces "significant liquidity risk".

On the stock exchange, Noble's shares fell two cents, or 5 per cent, to close at 37.5 Singapore cents.