Noble Group Plunges to Seven-Year Low as CEO Defends Finances

Noble Group Ltd. slumped to the lowest in almost seven years even as Chief Executive Officer Yusuf Alireza defended the finances of Asia’s biggest commodity trader.

The stock fell 8.8 percent on Tuesday and has lost more than 60 percent since February when Noble’s accounting methods first came under attack by a group called Iceberg Research. Since then, profit’s been hurt by the slide in global commodity markets, the company’s credit outlook has been cut to negative and its bonds are trading below prices typical for an investment grade issuer.

The pressure has made Noble a better company, Alireza said on Tuesday in an interview with Bloomberg Television. While Noble faces more scrutiny than rivals that aren’t listed or rated by credit agencies, it wants to continue as a publicly traded company, he said.

“As a public company, you have many more stakeholders that are constantly challenging you,” Alireza said. “You have an independent board, you have shareholders, you have bond investors, you have rating agencies, you have analysts that are constantly challenging you to become a better firm.”

Noble held a five-hour investor meeting on Monday in Singapore. Alireza pledged to boost annual operating income from Noble’s main assets to more than $2 billion within five years from $1.49 billion in 2014.

That promise failed to arrest the fall in the company’s shares, the most shorted stock in Singapore Straits Times Index. Noble has dropped 15 percent so far this week to 41.5 Singapore cents, the lowest since October 2008.

Greater Disclosure

“Giving greater disclosure on their businesses is encouraging, but they’ve continued to avoid the real issues,” Gillem Tulloch, founder of GMT Research Ltd., a persistent Noble critic, said in an interview.

He pointed to concerns that the company has been too aggressive in booking fair-value accounting gains from projects that don’t deliver enough cash or are a long way from starting production.

“That’s why the market continues to lose confidence in the company,” Tulloch said.

While Noble is rated at the lowest investment rank by both Moody’s Corp. and Standard & Poor’s, the bonds aren’t trading like investment-grade debt, said Ray Wepener, a credit trader at NH Investment & Securities HK Ltd. in Hong Kong.

Noble’s 2020 bonds were being indicated down 1 to 2 cents on the dollar in early trading on Tuesday to about the 89 cents, according to Wepener. That indicates a yield of 10 percent, comparable with Chinese property firms rated two to four levels below Noble, he said.

Default Protection

The cost of insuring against a default of Noble within the next year rose to 658.9 basis points on Monday, the highest since November 2011, according to data from CMA. That’s 118 basis points more than the cost of protection for Agile Property Holdings Ltd., which is rated with a negative outlook at Ba3, or three levels below Noble.

Even if Hong-Kong-based Noble’s credit is downgraded, it won’t spell the end of the company, Alireza said on Tuesday.

“We’ll do what’s required to support the investment grade, but it’s not required for our business,” Alireza said.

Alireza told investors on Monday that banks and strategic investors were interested in Noble and the board was keeping all options open, including the sale of assets to cut debt.

Noble asked PricewaterhouseCoopers LLP to look over its valuations and methodology. The audit firm said in a report made public last week that the trader complies with international rules, though further transparency is needed.

The company has also hired dealmaker Michael Klein, a former investment banking chairman at Citigroup Inc., to review financing and investment options.

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