- Sale of stake in Noble Agri approved at meeting in Singapore
- Proceeds from $750 million sale will be used to reduce debt
Noble Group Ltd.’s chief executive officer said the region’s top commodity trader still has the support of its banks, stepping up efforts to restore confidence after shareholders backed the sale of its agricultural unit and the company nibbled away at its debt burden by buying back bonds.
Stockholders at a special general meeting in Singapore approved sale of the 49 percent holding in Noble Agri Ltd. to Cofco Corp. for at least $750 million, with 90 percent of 4.03 billion shares represented at the gathering endorsing the deal. CEO Yusuf Alirezatold shareholders the sale would help the company to improve liquidity, and said separately banks continue to support the company.
Noble Group has extended losses in 2016 after Standard & Poor’s joined Moody’s Investors Service in cutting the company’s credit rating to junk, and as investors shunned commodity companies amid a rout in raw materials. The Hong Kong-based trader said earlier this month that it’s confident the Noble Agri deal would be approved, and will help its rating metrics to exceed those required for investment-grade credit. The company announced further bond repurchases Thursday, paring its debt burden.
“Banks are concerned about the sector, investors are concerned about the sector,” Alireza told shareholders ahead of the vote, referring to commodities. “The best thing to do is to show to our shareholders we have liquidity.”
After the result, Alireza told shareholders that the company has some $2.6 billion of debt that is maturing and these debts can be rolled over, without specifying a time frame. Noble Group’s banks continue to support the company, he said in response to a question.
Noble Group had $14.2 billion of liabilities on Sept. 30, according to its latest financial report, including $2.5 billion of bank debt and $458 million of bonds due within 12 months. It completed a $1.1 billion credit facility in October from six banks led by Bank of Tokyo-Mitsubishi UFJ Ltd., following a $2.3 billion of syndicated-loan facility in May from 35 lenders.
Some of that debt has already been repurchased. The company bought back $31.6 million of senior notes due in 2020, or 2.6 percent of the total principal amount, with $1.18 billion outstanding, Noble Group said in a statement early on Thursday, hours before the SGM got under way. The trader also repurchased $1 million of notes due 2018.
Noble Group’s shares traded unchanged at 27.5 Singapore cents at 2:53 p.m. and are 31 percent lower this year, the worst performer on the benchmark Straits Times Index. The stock sank 65 percent last year as raw materials fell, and the company’s accounting and finances were challenged by Muddy Waters LLC and a group called Iceberg Research. Noble Group rejected the claims.
Chairman and founder Richard Elman said he planned to make Noble Group into a smaller, more nimble company, according to comments to Reuters earlier this month in which he forecast that the commodity cycle was bottoming. Plans to bring new investors into the company were taking time, Elman said.
Proceeds from the sale of the Noble Agri stake will be used to repay debt, the company said in a statement on Dec. 23. The transaction will result in a non-cash loss of $546 million, or the difference between the sale price and carrying value of the asset as of Sept. 30, the company said.