Noble Group Ltd. climbed as much as 5.7 percent after selling the remaining stake in its agriculture unit to China’s Cofco Corp. for at least $750 million in cash, helping to ward off a credit-rating downgrade to junk.
Shares of Asia’s largest commodities trader rose to as high as 46.5 Singapore cents before trading 3.4 percent higher at 45.5 cents as of 9:21 a.m., set for the highest close in more than a month. In addition to the upfront payment, Noble said it may receive as much $200 million in additional amounts depending on the future growth of the unit known as Noble Agri.
“It helps Noble to raise the cash it needed to avert being downgraded to junk status, and also to get rid of liabilities,” Bernard Aw, a strategist at IG Asia Pte, said by e-mail. “It’s critical for Noble to convince investors that it can transform the ailing company.”
In recent months, Standard & Poor’s and Moody’s Investors Service have said they may reduce Noble’s credit rating to junk if its liquidity position doesn’t improve. The Hong Kong-based trader said in a statement that the entire proceeds from the sale will be used to pay down debts.
Noble said it would tentatively take a non-cash loss of $546 million as it carried a higher valuation for Noble Agri on its books than the sale price. Still, the trader said the cash injection from the sale would strengthen its balance sheet above the investment-grade threshold that both S&P and Moody’s use. Noble said in a separate slide presentation that its adjusted net debt would drop to $1.76 billion after the sale, from $2.51 billion beforehand.
Noble’s stock has plunged 60 percent this year after short-seller Muddy Waters LLC and a group called Iceberg Research criticized the company’s accounting amid a commodity collapse.