Noble Group bank loans plunge amid concerns about prospects

HONG KONG: Prices on Noble Group Ltd’s bank debt sank further in the past week amid concerns about prospects for the embattled commodity trader.

Two more blocks of the Hong Kong-based company’s revolving credit facility due May 2018 were traded at 59 US cents and 50 US cents on the US dollar, respectively, this week, people familiar with the matter said.

That’s down from the 62 US cents it was said to have traded last Friday.

Prices on the facility were stable at 90-92 US cents in recent months before the Hong Kong-based trader on May 9 warned of a first-quarter loss.

The plunge in Noble’s loan and bond prices show investors are losing confidence fast over its ability to avoid default, according to MUFG Securities Asia.

The company’s 2020 bonds have tumbled about 60 US cents on the dollar since the beginning of May to 35.9 US cents as of 6.10pm in Hong Kong.

Noble’s stock slumped 75% in May, slicing S$1.4bil (US$1bil) off its market value. The shares dropped 5.4% yesterday.

“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.”

Noble Group declined to comment on secondary prices of its debt, according to its external media advisers Bell Pottinger LLP. Noble said in a June 1 ‘Sustainability Report’ that it is “building momentum for future success.”

“We have had a busy year repositioning the firm to focus on key activities, rationalising our cost base and raising liquidity to drive growth,” co-CEOs Will Randall and Jeff Frase said in the report.

The size of the loan block traded at 50 US cents was about US$10mil, according to the people, who asked not to be identified because they aren’t authorized to speak publicly.

Noble hired Chicago-based law firm Kirkland & Ellis as legal counsel, according to a person familiar with the matter this week, after appointing Morgan Stanley and Moelis & Co to review its options.

Noble and Kirkland & Ellis didn’t comment on the report when contacted by Bloomberg.

Noble was talking to banks about replacing a US$2bil credit facility that expires at the end of this month and underpins its key oil business, people familiar with the matter said in May.

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.– Bloomberg