Noble Group flags $5 billion annual loss, races to strike debt deal

  • The troubled commodities trader warned of a massive annual loss, citing challenging operating conditions.
  • It said it was making progress to clinch a $3.4 billion debt-for-equity swap to ensure its survival.
The company logo of Noble Group at its headquarters in Hong Kong
Bobby Yip | Reuters
The company logo of Noble Group at its headquarters in Hong Kong

Troubled commodities trader Noble Group warned of a massive annual loss, citing challenging operating conditions, but said it was making progress to clinch a $3.4 billion debt-for-equity swap to ensure its survival.

Noble announced a deal with creditors last month to halve its senior debt and give them 70 percent of the company, while existing equity holders would see their stake diluted to 10 percent.

This follows three crisis-wracked years in which Noble — once a global commodity trader with ambitions to rival the likes of Glencore and Vitol — cut hundreds of jobs, sold billions of dollars of assets, took hefty writedowns and changed its CEOs and chairman.

"Operating conditions continued to be challenging in 4Q 2017 as the group continued to manage the business within existing constraints in trade finance and liquidity availability," Singapore-listed Noble said in a statement on Monday.

The Hong Kong-headquartered company expects a total net loss of $1.72 billion to $1.92 billion for the quarter ending December 2017, stemming largely from non-cash losses from its mark-to-market derivatives portfolio.

This will lead to a record annual loss of $4.78 billion to $4.98 billion, which follows a profit of $9 million in 2016 and a loss of $1.7 billion in 2015.

"Following a challenging 2017, we are looking forward to the final phase of our restructuring, and the creation of a new Noble as a focused and appropriately financed group set to capitalize on the high-growth Asian commodities sector," said Paul Brough, a restructuring specialist who took over as Noble's chairman last year.

Noble warned that the expected quarterly net loss would result in a negative net asset position for the group, but said the board "believes that the proposed restructuring, once implemented, should restore shareholders' equity and create a sustainable capital structure..."

Noble also said a group of senior creditors with whom it was discussing its restructuring, called the "Ad Hoc Group", held about 36 percent of the company's senior bonds and loans.

The Ad Hoc Group's advisers were in contact with creditors who held about an additional 15 percent of Noble's senior debt instruments and had indicated their road support for a restructuring.

Founded in 1986 by Richard Elman, who rode a commodities bull run to build Noble into one of the world's biggest traders, the company was plunged into crisis in February 2015 when Iceberg Research questioned its accounts. Noble has defended its accounts.

The company's market value has fallen to just S$259 million($197 million) from the $6 billion it commanded in February 2015. Noble said the latest profit guidance and ranges were estimates and may change as it finalizes its annual results, which will be announced on February 28.