Noble CEO resigns; firm to sell profitable US unit

Singapore

THE year-long uncertainty over the financial solvency of Singapore-listed commodity trader Noble Group has claimed the scalp of its chief executive Yusuf Alireza and led to the sale of one of the firm's more profitable business units.

Mr Alireza, 45, has resigned "for family reasons", a Singapore Exchange (SGX) announcement said on Monday morning.

At the same time, Noble said it will sell US energy-distribution firm Noble Americas Energy Solutions (NAES) to raise cash to strengthen its balance sheet.

Two co-CEOs have been appointed to replace Mr Alireza. The first is Hong Kong-based Noble old-timer and coal veteran William Randall; the 41-year-old is Noble's current president and executive director.

The other co-CEO is Connecticut-based oil veteran Jeff Frase, 48, the current president of Noble Americas and head of oil liquids.

Noble founder Richard Elman remains as chairman.

The twin moves surprised the market, which sent Noble shares down 8 per cent.

DBS analyst Mervin Song said investors will remain cautious until Noble is able to achieve positive operating or free cashflows on a sustained basis. "We maintain our 'hold' recommendation and target price of S$0.32, pending further details on the sale of NAES," he said.

Religare Capital Markets analyst Nirgunan Tiruchelvam shrugged off the CEO's departure.

"We are bullish on the stock. It is trading at a vast discount to its book value. The personnel changes are less relevant than the value proposition," he told The Business Times.

Iceberg Research, the little-known firm that shot to prominence after its critical report on Noble's accounting practices last February, called Mr Alireza's resignation long overdue.

Asked about the NAES sale, it told BT: "The company is in crisis mode and is trying to sell all its assets to survive."

Mr Alireza joined Noble in 2012 from investment bank Goldman Sachs, where he was Asia-Pacific co-president. He was brought in after former CEO Ricardo Leiman abruptly left in 2011, when the firm recorded its first quarterly loss in 14 years. During his tenure, Mr Alireza oversaw a shrinking of the firm's physical assets, which had grown under Mr Leiman's watch. Plans to list Noble's agricultural unit were shelved in 2012 due to negative sentiment.

In the past year, as shortsellers pounced on Iceberg's report, Mr Alireza fought to restore investor confidence.

A Noble press release credited him with guiding the company through a challenging period.

Mr Alireza was also instrumental in helping the company secure the US$3 billion in financing announced this month, Noble said.

"With this transformation process now largely complete, Mr Alireza considered that the time was right for him to move on," said the company.

"The board looks forward to working with Yusuf in the future should the opportunity arise."

Noble eventually sold its loss-making agri-business unit - which included assets such as sugar mills and oilseed crushing facilities - to China's state-owned grain trader Cofco. About half the company was sold in 2014 in the formation of the Noble Agri joint venture. The remainder was sold earlier this year.

The sale of NAES, meanwhile, could reap a cash windfall for Noble, but remove one of its more promising business lines.

Formerly called Sempra Energy Solutions, NAES was acquired in late 2010 for US$317 million in cash, even as Noble assumed the US$265 million debt Sempra had.

NAES buys energy wholesale and repackages it into products for commercial and industrial customers, and now services 1,500 customers.

Noble said in an investor presentation last August that NAES was valued on its books at US$322 million, which is close to its cost price. But comparable market transaction multiples implied a valuation "well in excess of US$1.25 billion", Noble said.

The upcoming NAES sale takes place amid continued doubts over Noble's finances.

Noble came under attack from Iceberg last year, with the research firm alleging accounting improprieties, including overstated fair values for Noble's long-term contracts.

Noble shrugged off the allegations and claimed Iceberg was the work of a disgruntled former junior employee it had fired.

But the dirt stuck. Beset by market doubts over its solvency amid a commodity-price slump, Noble shares plummeted from over S$1 a share to below S$0.30 a share.

In February, Noble reported its first annual loss in almost 20 years. Net loss for 2015, which included significant impairments, amounted to US$1.67 billion.

In the first three months of the year, Noble recorded a net profit of US$40.5 million, down from US$106.6 million a year ago.

The firm said its focus on liquidity and the constraints placed by banks and counterparties had limited its trading opportunities.

The big three credit rating agencies have downgraded Noble's debt to junk status in the past half year. This hurt Noble as it meant the need for more collateral; it also meant less debt could be taken on and higher interest costs would have to be paid.

In its latest note on May 17, Fitch Ratings said Noble's shift to shorter-term debt signalled a weakening debt maturity profile "no longer ... consistent with an investment-grade rating".

On Monday, Noble traded unchanged near Friday's close of S$0.305 for most of the day, before a sharp drop in the afternoon to S$0.28, down 2.5 cents or 8 per cent.