[BENGALURU] Global energy firm Noble Group is in the market with a US$2.5 billion, one-year borrowing base revolving credit facility that will refinance existing debt due later this year, banking sources told Thomson Reuters.
The renewal of Noble loans is eagerly watched by the market as the most important development this year for the embattled trader of commodities from iron ore to oil, which suffered a dip in investor confidence over the past year.
The loans that have Noble Americas as borrower include a US$1.5 billion committed loan and a US$1 billion uncommitted loan, which lenders can refuse to provide.
The facility that is being arranged by MUFG was offered to bank investors in New York on March 7. It will refinance and combine two existing loans including a US$1.1 billion letter of credit facility and a US$1 billion existing revolver. Investors have until March 25 to commit to the transaction.
The loans can be increased by US$750 million, to US$3.25 billion, and are available for the purchase, storage and sale of crude oil, base metals, natural gas, power, biodiesel, biofuel and other raw materials.
A borrowing base is the amount of money that can be borrowed under a revolving credit facility based on the value of the company's assets.
Noble's loans will be secured by a first priority preferred security interest in all of the personal property assets of the borrower and subsidiary guarantors subject to certain exclusions.
Noble has mostly borrowed on an unsecured basis. Adding the borrowing base to its loans signals that given the current slump in raw material prices, the company had to come up with additional protection for lenders in order to access credit.
Noble is attempting to refinance its debt as it battles to boost investor confidence after Standard & Poor's and Moody's Investors Service cut the company's investment grade ratings to junk in January and in December 2015, respectively, following accusations on accounting irregularities and weak markets.
Both agencies downgraded the ratings by two additional levels in February.
The fact that banks are prepared to lend again, and in larger amounts, will likely be seen as a positive breakthrough for the commodity merchant.
Pricing on the uncommitted portion is based on Noble's current credit ratings of BB-/Ba3. It starts at 160 basis points over Libor and climbs to LIB+185 if ratings drop to B+/B1.
Pricing on the committed portion opens at LIB+170 and changes based upon utilization of the revolving credit. If the company uses more than 50 percent of the credit, pricing moves to LIB+210. If the company uses less than 50 percent, pricing climbs to LIB+215. If ratings drop to B+/B1, pricing on the committed portion climbs to LIB+195, and paying LIB+235 and LIB+240, based on utilization.
As an incentive to participate in the financing the company is offering fees of 75bp for commitments of or greater than US$300 million, 70bp for commitments of or greater than US$200 million, 65bp for commitments of or greater than US$100 million, 62.5bp for commitments of or greater than US$50 million, and 57.5bp for commitments of less than US$50 million.
In January, the company said it expected to refinance its revolving credit facility and reported its first annual loss in nearly 20 years, battered by a US$1.2 billion writedown for weak coal prices.
S&P said the loss was credit negative and could complicate refinancing a credit facility in May. "The downgrade shouldn't come as a surprise to anyone, but it is a major issue for the refinancing," Robert Southey, managing partner at London-based boutique firm Trench Capital Partners, told Reuters ahead of Noble's results.
Hit by the collapse in commodity markets, Noble's shares have plunged about 55 per cent in the past 12 months, and its bonds have sold off over the past year after Iceberg Research alleged it was inflating its assets by billions of dollars.
Noble rejected the claims and board-appointed consultants PricewaterhouseCoopers found it had complied with international accounting rules.
The news of the refinancing was first reported by Bloomberg earlier on Tuesday.