Noble Group is said to ask lenders to extend credit facility

[LONDON] Noble Group Ltd is asking lenders to extend a key credit facility until the end of the year as the embattled commodity trader seeks breathing room to negotiate its future. The stock extended a plunge to the lowest level in more than 16 years.

The company's core banks have hired law firm Clifford Chance LLP to advise them amid crisis talks over a US$2 billion credit facility that expires this month, according to a person with knowledge of the discussions.

Noble is asking banks to extend the facility to the end of the year, as well as negotiating new covenants on its bank debt, said the person, who asked not to be named because the discussions are confidential.

The moves signal the company and its banks are preparing for protracted negotiations over the trader's future. Noble has hired Chicago-based law firm Kirkland & Ellis LLP as legal counsel, Bloomberg reported last week, after appointing Morgan Stanley and Moelis & Co to review its options.

Prices for Noble's shares and bonds have tumbled in recent weeks after the trading house reported a shock US$129 million quarterly loss in May. On Friday, its bonds due in 2020 fell to a record low of 37 cents on the dollar, while its revolving credit facility due in May 2018 traded at 50 cents on the dollar last week. The stock slumped 8.6 per cent to close at 32 Singapore cents on Monday, the lowest since September 2000.

The surprise loss announced last month capped two turbulent years for the company, once Asia's largest commodity trader, marked by losses, asset sales, and accusations of improper accounting. Its market capitalisation has fallen from a peak of more than US$10 billion to less than US$500 million.

Noble has sought to sign a new credit line to replace the US$2 billion borrowing base facility that expires this month, the person said. As an alternative, it's asking banks to extend the existing facility until the end of the year.

An extension of the credit facility would give Noble, which announced a strategic review last month, further time to find new investors, sell assets, or close unprofitable businesses. The company's existing shareholders include China Investment Corp, the nation's sovereign wealth fund.

The trading house is negotiating new covenants related to interest payments and net tangible assets that it has to meet in June on the facility as well as the US$1.1 billion revolving credit facility maturing in May 2018, the person said.

Noble last month appointed Paul Brough, a restructuring specialist who worked on the liquidation of Lehman Brothers, as its chairman, replacing founder Richard Elman. Fitch Ratings Ltd cut its rating for a second time in 10 days last week while S&P Global Ratings has flagged the risk of a default within a year. Muddy Waters LLC founder Carson Block expects Noble to almost certainly undergo a restructuring.

"Pricing of unsecured bonds and loans reflects the market perception that probability of default is high," said Rick Mattila, international head of market strategy at MUFG Securities Asia.

"Despite that, banks may be willing to refinance secured credit facilities."

BLOOMBERG