SINGAPORE (Reuters) – Struggling commodities trader Noble Group agreed to sell its Americas-focused oil liquids business to Vitol for about $580 million as part of a debt-cutting strategy, and warned of a big loss for its third quarter.
Monday’s move came after Reuters reported late on Friday that Vitol, the world’s largest oil trader, was nearing a deal to buy Singapore-listed Noble’s oil liquids unit.
Once Asia’s biggest commodities trading house, Noble is slashing jobs and selling assets to reduce its debt and win support from its lenders after a crisis-wracked two years. In July it agreed to sell its smaller gas and power business to Mercuria as it focuses on its core Asian coal trading and LNG businesses.
Annisa Lee, Nomura’s head of Asia ex-Japan’s flow credit analysis, said the asset sale was expected and the “longer-term concern” was the ongoing operating losses.
“I guess the question is when are they going to basically turn around their business, which is quite key. If they can actually provide more details, what sort of assets they can still sell, that would be great,” she said.
Hong Kong-based Noble was plunged into crisis in February 2015 when Iceberg Research questioned its accounts, and then the company was hit by a commodities downturn.
While Noble has stood by its accounts, the upheaval triggered a share price collapse, credit downgrades, a series of writedowns, as well as fund raising and management changes. Noble’s market value has plummeted to less than $400 million from $6 billion in February 2015.
Noble warned of a total net loss of $1.1 billion to $1.25 billion in the three months ending September, citing non-cash losses and underlying trading results. This follows a $1.75 billion net loss reported in April-June.
In July, it announced an up-to-$1 billion disposal plan for assets outside North America over the next two years as Chairman Paul Brough, a restructuring specialist appointed in May, sought to tackle Noble’s more than $3 billion of debt.
“Conservative liquidity management and constraints placed on the group’s access to trade finance lines led to disruption costs and prevented the group from taking advantage of profitable trading opportunities,” the company said.
Its stock fell 10 percent on Monday, extending losses to 80 percent this year.
NEGOTIATIONS WITH LENDERS
Noble has been locked in negotiations with its core lenders to support a $2 billion credit facility, secured on its inventories and working capital.
“Whilst no assurance can be given as to the outcome of these discussions, the group believes that these are open and constructive, and are moving forward,” it said.
Noble said the gross proceeds from the proposed sale of its oil liquids business would be $1.4 billion, and after deducting indebtedness of about $836 million, the cash proceeds would be about $580 million.
In August, ratings agencies S&P and Moody’s cut their credit ratings on Noble, citing high default risks.
Noble is a big player in the global physical oil market, trading crude and refined products. But its operations shrank this year due to higher prices and liquidity constraints. The company has blending and wholesale capabilities in North America and the Caribbean, alongside long-term storage leases globally.
A purchase of Noble’s oil liquids business will reinforce Vitol’s position as a leading oil trader.
Reporting by Anshuman Daga; Editing by Stephen Coates