Noble to include Noble Petro in sale of US oil liquids unit; keeps Moody's Caa3 rating

NOBLE Group said on Tuesday it has agreed to include equity interest in Noble Petro in its proposed sale of wholly owned subsidiary Noble Americas Corp (NAC) to rival Vitol US Holding Co, rather than sell this stake to a third party.

The debt-laden commodities trader said the inclusion of Noble Petro and certain other adjustments would increase the base consideration in the sale of NAC by US$15 million to US$217 million from approximately US$202 million as at July 1, 2017.

The gross consideration from the NAC sale would amount to approximately US$1.43 billion, comprising the new base consideration of US$217 million and the net working capital of approximately US$1.22 billion as at June 30, 2017.

This would result in cash proceeds from the proposed disposal of about US$597 million, after deducting debt of approximately US$836 million as at June 30, 2017, said Noble Group in a pre-market filing.

Noble had originally agreed to sell its American unit NAC to Vitol, the world's largest oil trader, and its parent Euromin for about US$1.42 billion. But the final consideration for the sale was to be based on a number of variables, including the value of NAC's interests in Noble Petro and NAC's contracts.

Noble Petro distributes gasoline and diesel in Texas and along the US Gulf Coast.

Noble put NAC up for sale in July as part of a strategy to survive by selling off assets to pay down debt after posting a second-quarter loss of US$1.8 billion. It earlier sold its North American gas and power businesses for US$248 million.

Noble reiterated on Tuesday that it will hold a special general meeting to seek shareholder approval for the proposed disposal of NAC.

Separately on Tuesday, Moody's Investors Service said Noble's weak financial third quarter results will have no immediate impact on its Caa3 corporate family rating or negative rating outlook.

"Noble's continued to report a large net loss and its cash holdings further decreased in Q3 2017. That said, these developments are within expectations and the current Caa3 rating already reflects a significant probability of default within the next 12 months," said Gloria Tsuen, Moody's vice president and senior analyst.

The company reported a net loss of US$1.2 billion for the quarter, mainly due to write-downs for net fair value gains and the loss related to the sales of its businesses.

Its cash and short-term deposits, excluding cash balances with future brokers, fell to US$256 million at end-September 2017 from US$467 million at end-June 2017.

This is insufficient to cover the company's US$1.6 billion in bank debt and bonds due in the next 12 months, Moodys said on Tuesday.

Noble's cash flow from operations turned to positive US$236 million from negative US$546 million in the previous quarter, mainly because of a decrease in working capital deficits. However, Moody's said it expects the company to have difficulty in generating positive cash flow, given its weak underlying profitability.

Moodys also said it is highly uncertain whether Noble's sales of assets will raise sufficient proceeds to meet its debt maturities and cash outflow over the next 12 months.

"In addition, the proposed disposals would substantially reduce Noble's scale and global reach, challenging its ability to generate profit and cash flow to service the remaining debt," said the credit ratings agency.

Moody's assessment comes a day after a key bank was reported to have cut its support for Noble, while the company announced the resignation of co-chief executive Jeffrey Frase to pursue other opportunities.

Bloomberg reported DBS Group sold its US$60 million stake in Noble's US$1.1 billion revolving credit facility) due in May next year, and closed other financing to the company.

Noble shares were trading down 2 cents, or 9 per cent, at 20 Singapore cents as of 11:40am on Tuesday. The stock has lost some 88 per cent of its value so far this year.