Noble Group said to raise US$200m by selling receivables

[SINGAPORE] Noble Group Ltd, the commodity trader whose credit rating was cut to junk by Standard & Poor's on Thursday, will receive about US$200 million after selling receivables to shore up its balance sheet, according to people with knowledge of the matter.

Noble Group sold the bundle of payments owed to the trading house to raise cash to reduce its own debt, said the people who asked not to be identified because the matter is private. The deal comes after the company last month agreed to sell its remaining 49 per cent stake in agricultural unit Noble Agri Ltd to China's Cofco Corp for at least US$750 million.

Chief Executive Officer Yusuf Alireza is battling to restore confidence in the Hong Kong-based commodity trader's finances after S&P cut its rating and kept it on watch for further possible downgrade. Noble Group no longer has a "strong" liquidity position and its standing with capital markets and lenders has "weakened," said S&P, which followed a similar ratings cut by Moody's Investors Service in December.

Noble Group, listed in Singapore, said on Thursday that increased collateral calls by counterparties had been "immaterial," after saying in November that they could boost the company's costs by US$100 million to US$200 million. The collateral calls, or increased security demanded by counterparties to trade, rose by less than US$70 million before the S&P downgrade, two people familiar with the matter said.

Alireza has previously said Noble Group will increase the amount of trade finance secured by inventories of the commodities it trades. The company's junk rating will allow it to access secured financing above a previous limit of 10 per cent of its debt, the people said.

A London-based spokeswoman for Noble Group declined to comment.

In October, Noble Group raised US$1.1 billion through a borrowing base facility, securing the funds against oil inventories with the help of six banks lead by The Bank of Tokyo-Mitsubishi UFJ Ltd. and Societe Generale SA. That more than doubled the US$450 million Noble Group had previously held in the same type of secured loans.

Noble Group said last month it will book an estimated loss in 2015 of US$546 million on the sale of the 49 per cent Noble Agri stake, which reflects the difference between the price Cofco is paying and the valuation the trading house carried on its balance sheet. Cofco paid US$1.5 billion when it acquired its initial 51 per cent stake in the agricultural unit from Noble Group in 2014.

Assuming Noble Group uses the US$750 million from the stake sale to repay debt, the company would have about US$2.2 billion of debt maturing in the next 12 months, according to S&P estimates. As of September, the company had about US$2 billion of undrawn credit lines and cash, S&P said.

Noble Group reported positive operating cash flows during the third quarter of 2015 for the first time in more than a year as its oil, gas and power trading operations generated profits.

S&P said in its Jan 7 report that it expects Noble Group's profitability will "face constraints" in the next year because of weak commodity prices and heightened volatility. While trading houses are less vulnerable to weakness in commodity prices than producers, Noble Group is not immune as "the credit quality of the company's trading counterparties may decline," S&P said.

Noble Group shares fell 1.5 per cent on Friday to their lowest level since October 2008. Yields on the company's 2020 bond narrowed by 240 basis points, after reaching a record 25.81 per cent on Thursday.

BLOOMBERG