Noble Group Shares Suffer Biggest Ever Slide After Loss Warning

  • Company’s 6.75% notes due 2020 drop to lowest since January
  • Noble warned Tuesday it will post $130 million quarterly loss

Noble Group Ltd.’s shares plunged the most on record to the lowest level in more than 14 years after it warned of a first-quarter loss and as S&P Global Ratings said the commodity trader’s debt-load is unsustainable given its current earnings path.

Shares of the Hong Kong-based company, which counts China Investment Corp. as one of its largest shareholders, slumped 32 percent to close at 87.5 Singapore cents, the biggest decline on record and the lowest level since October 2002. This has slashed Noble’s market value to less than $1 billion in U.S. dollar terms, a shadow of the $10.2 billion trading behemoth it was in 2010.

Noble said Tuesday it will record a $130 million net loss in the first quarter because of wrong-way bets on coal prices and dwindling liquidity, compared with a profit of $40.5 million a year ago. That’s just the latest in a string of setbacks for Noble, once the largest commodity trader in Asia, which has been selling assets and cutting costs to prop up its finances after a torrid few years marked by losses, credit-rating downgrades and a share-price collapse.

“If you assess their earnings power of the past one year, based on the current profit runway, their debt-load is not sustainable,” said Danny Huang, director of corporate ratings at S&P in Hong Kong, adding that bank support remains important for Noble. “The headline loss of $130 million doesn’t look very good and we have to see what are the reasons for that, even though one would be reasonable not to expect them to report a huge recovery.”

Noble’s shares have plunged 49 percent in 2017 even as it undertook a share consolidation to avoid penny stock status. That followed an 80 percent slump in 2015 and 2016 combined. The company -- which declined to offer fresh comment on Thursday -- is scheduled to release results for the three months ended March after markets close, with executives holding an earnings call at 6:30 p.m.

‘Under Siege’

Noble didn’t renew a $615 million revolving credit line that was repaid when it came due this week, according to people familiar with the matter, a sign that it’s left with more expensive funding -- including a junk bond that costs four times the credit line it repaid. Noble’s 6.75 percent 2020 notes lost 3.4 cents to 87.6 cents on the dollar, according to Bloomberg-compiled prices. They earlier fell to 85.2 cents, the lowest since Jan. 3.

Noble highlighted at its annual results in February that liquidity constraints had clipped the wings of its traders, with Chief Financial Officer Paul Jackaman telling investors that it was unable to pursue new higher margin opportunities because it wanted to preserve liquidity.

“The setbacks just keep coming for this under-siege company,” said Nicholas Teo, a trading strategist at KGI Securities Pte in Singapore. “What has come as a surprise, though, is the size of the loss expected. One would have thought they may have scaled down bets in view of their reduced capital base.”

— With assistance by Andy Hoffman, Jack Farchy, and Lianting Tu

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