×

UPDATE 2-Embattled Noble links with Mercuria as it slims down to stay afloat

* Noble agrees to sell U.S. gas and power business to Mercuria

* Expects Q2 net loss of up to $1.8 billion

* To reduce headcount to 400 from about 900 (Writes through with additional detail)

SINGAPORE, July 26 (Reuters) - Noble, once Asia's largest commodities trader, will tie up with rival Mercuria Energy Group as part of a dramatic downsizing that will trim its already battered business, halve staff and result in a quarterly loss of as much as $1.8 billion.

Announcing a $1 billion asset disposal plan as it tackles its debts, Noble said in the statement it would sell its U.S. gas and power business to Mercuria for $248 million. It has also begun the process of selling its oil liquids business - further narrowing its focus on "hard commodities," essentially coal.

Singapore-based Noble has struggled to repair investor confidence following setbacks over the past two years: first blogger Iceberg Research questioned its accounts in early 2015, and then it was hit by a brutal downturn in commodities markets.

The company has stood by its accounts. But the upheaval meant a collapsing share price, credit downgrades, management change and asset sales. Noble's market value has shrunk to $554 million, from $6 billion in February 2015.

Wednesday's surprise announcement is the latest move to whittle down a once sprawling business to a sliver of its former self, in order to help it repay debt and keep trading.

One of Noble's rivals in the cut-throat world of commodities trading, Swiss-based Mercuria, will now step in as a partner as the two "explore strategic alliances in Asia," Noble said.

Noble has been seeking a cash injection for months and said on Wednesday it would continue to look for a new investor, as well as alliances such as the deal announced with Mercuria, to help fund its working capital.

Mercuria's chief executive Marco Dunand said last year the company was looking to expand further in natural gas in North America after buying a large gas portfolio through its purchase of JP Morgan Chase & Co's physical trading arm in 2014.

It is looking to acquire physical assets in Louisiana, a source with knowledge of the matter said.

Mercuria has also been focused on growing it's Asian business, particularly in China. ChemChina bought a 12 percent stake in the trading house last year.

"REALISTIC"

Cheap and plentiful funding is critical for commodities traders. Noble, tackling $3.3 billion of debt, blamed the need to scale back risk and conserve cash for a second-quarter loss it estimated at $1.7 billion to $1.8 billion - more than double its market value - as it was not able to seize opportunities.

The net loss also includes the impact of writedowns on its portfolio - it announced $1.2 billion to $1.3 billion of exceptional items. Last year, the group posted a quarterly net loss of just under $55 million.

Noble said it expected further strain in the commodities trading industry as players grapple with low margins and lenders seek to reduce exposure. The group said it was "positioning itself for continuing stress in the sector, which the board believes is likely to lead to industry consolidation."

As its business struggles, Noble has battled to retain staff, offering cash bonuses for top performers. But on Wednesday, as part of asset sales and cost cuts, it said it would also slash jobs, reducing its staff to 400 from about 900.

Chairman Paul Brough, a restructuring specialist appointed earlier this year, said Wednesday's overhaul offered "a realistic prospect of dealing with the group's liabilities."

"The group further believes that its creditors and shareholders now have a clearer view of its direction and plans to address its challenges," he said.

After the latest sales, Noble is now focused on coal, freight and LNG.

Richard Elman, who founded the company in 1986, took advantage of a commodities bull run to build Noble into one of the world's biggest traders.

In the last two years Elman, 77, had sought to steer Noble back its roots as an asset-light trading house, shedding what it accumulated during a purchasing spree across the sector.

Elman stepped down as chairman this year but remains the company's biggest shareholder, with a stake of just over 18 percent. Other top shareholders include sovereign wealth fund China Investment Corp and Orbis Investment Management.

Noble said negotiations with its lenders were continuing.

Last month, the company was granted a four-month extension by lenders on a key credit deadline, giving Noble until October. (Reporting by Anshuman Daga; Additional reporting by Julia Payne in London; Writing by Clara Ferreira-Marques; Editing by Muralikumar Anantharaman and Alex Richardson)