The Hong Kong-based trading house won’t repay $379mn coming due on March 20, as it seeks to preserve the company’s assets “for the benefit of all stakeholders during the implementation of the proposed restructuring,” it said in a statement on Friday.
Noble will also miss a coupon payment due last week on $750mn of bonds maturing in March 2022, for which it can use a 30-day grace period.
The failed payments are set to prompt an “event of default” under the terms of its bond documents.
That, in turn, will likely trigger payouts on credit default swap contracts tied to the company and activate cross-default clauses on other debts, according to law firm Eversheds Sutherland.
Noble is teetering on the brink of collapse more than three years after then-unknown Iceberg Research started publishing critiques of its accounting. Since then, the company has shrunk to a shadow of its former self, battered by trading losses and massive writedowns.
A default on its debt could have significant consequences for Noble if it prompts trading counterparties to walk away from contracts.
The company has already downgraded its guidance for trading volumes at its core coal business next year, from 65mn tonnes in a presentation in January to 61mn tonnes in a presentation this week.
“If they default, in theory they can still operate as normal but some customers may have clauses which they can exercise and stop trading with them,” said Annisa Lee, a credit analyst at Nomura International (Hong Kong) Ltd.
Paul Brough, Noble’s executive chairman, told investors last month that it was “important from a customer and supplier perspective that we are seen to be compliant with our borrowing obligations.” He declined to say what proportion of the company’s contracts contained a credit-event clause.
The company said on Wednesday it has the backing of 46% of its senior creditors – including Varde Partners,
Och-Ziff Capital Management and Taconic Capital Advisors – for a revised restructuring plan, but is seeking to win the backing of dissenting investors.
Under the terms of the plan, Noble will still hand control of the company to its creditors, which include several large hedge funds, while giving existing shareholders and some junior creditors a slightly revised deal.
The trader threatened to file for administration in the UK without support from shareholders and creditors.
