Noble Group finalised $3 billion in credit facilities on Thursday, a crucial move allowing Asia's biggest commodity trader to refinance all of its debt maturing this year as it reported a 62 percent fall in quarterly profit. The Singapore-listed company, hit hard by credit rating downgrades, expects improved credit conditions to boost its business following tightening of credit lines in the latest quarter.
Noble is trying to shore up investor confidence after Standard & Poor's and Moody's cut its ratings to junk but the company could end up paying one of the highest interest rates in its existence, Reuters has reported. "The group's focus on liquidity limited the trading opportunities of our businesses during the quarter, particularly oil liquids and gas and power," Noble CEO Yusuf Alireza told analysts. "These facilities address substantially all of our remaining 2016 debt."
Funding is a life-blood of commodities trading, with Noble's rivals such as Vitol and Trafigura also holding open credit lines worth billions of dollars with banks. Noble came under the spotlight in February 2015 when it was accused by Iceberg Research of overstating its assets by billions of dollars, claims which Noble has rejected.
Hit by the worst rout in commodity markets in decades, Alireza has steered the company to sell assets, cut business lines and taken big writedowns.
"We believe a more severe Chinese economic slowdown, if realized, would impact Noble's operations," Monaco-based Pascal Le Petit, fixed income advisor at Societe Generale's Private Bank, told Reuters ahead of Noble's results, when asked about the biggest risks it faced after closing refinancing. The latest credit facilities include $1 billion in an unsecured 364 day revolving loan facility, a transaction which was supported by 25 banks, Noble said.
Yusuf said Noble is now taking active measures to replace and restructure its previously available bank lines along with securing alternative sources of working capital funding. Hong Kong-headquartered Noble reported a net profit of $40.5 million in the three months to March 31 from $106.6 million a year ago on a 32 percent fall in revenue to $11.39 billion.
Noble is paying an interest rate of 225 basis points over the US dollar Libor on the loan, more than twice the 85 basis points it paid just a year ago, Reuters reported, quoting sources close to the matter. The interest rate will be the highest for a one-year loan in Noble's history in Asia, according to Thomson Reuters LPC. Noble declined to provide terms of the loan. In addition, Noble announced a $2 billion credit facility for issue of trade finance instruments such as letters of credit, as well as loans. In February, Noble reported its first annual loss since 1998, battered by a $1.2 billion writedown for weak coal prices. The company's shares slumped 65 percent last year, knocking it out of the benchmark Straits Times index.
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