Noble faces coupon payment test amid mounting pressure

Embattled commodities trader Noble Group faces two key coupon payment tests this month, pressuring the company even after it won a temporary reprieve from lenders with an extension to a borrowing base facility until mid-January.Noble is due to make a coupon payment of about $32.8mn today for its $750mn notes maturing 2022, according to Bloomberg-compiled data. It subsequently faces a payment of about $6.9mn on September 20 for its $379mn of securities due in 2018, the data show.An external media representative for Noble declined to comment.The company is fighting for survival more than two years into a crisis marked by criticisms of its accounting, a plunge in its securities and credit-rating downgrades. Once Asia’s largest commodity trader, its market value has shrunk to about $407mn, from more than $10bn at the end of 2010. While the trader has won a short-term reprieve from lenders, it still faces hurdles as it seeks to avoid insolvency.“It’s positive that Noble has managed to get an extension, but the key concern remains in the large amount of debt maturities due in 2018,” said Annisa Lee, head of Asia ex-Japan flow credit analysis at Nomura International (Hong Kong). “We expect Noble to make both coupon payments as they have enough cash. We also think they are keen to avoid a default, which could result in liquidation or debt restructuring.”The trader faces a mounting debt load. Moody’s Investors Service estimated in August that the company had $2.6bn in bank debt and bonds due in the next 12 months. Noble had cash and equivalents of $736.7mn as of June 30, according to a company filing.The firm won a temporary extension from lenders for a borrowing base facility that underpins its US oil business until January 15, the company said in a statement on Thursday. The additional time will facilitate the sales process for the group’s oil liquids business, it said.Chairman Paul Brough earlier this week said he expected to find a buyer for the unit by the end of the month. While the impact of Hurricane Harvey has “made it a little difficult” for some of its investors, Brough said he was keeping to the timetable.Shareholders earlier this week approved the sale of Noble’s gas and power unit to Mercuria Energy Group. The trader is selling that unit along with its oil liquids unit to shore up its finances after posting a $1.75bn loss in the second quarter and a surge in net debt. Moody’s has warned that the planned sales may be insufficient to cover its debt, while S&P Global Ratings sees non-repayment risk in the next months.The disposal of Noble’s two operations are a crucial part of the company’s strategy to raise funds and negotiate a survival plan with lenders. The company’s plan to sell parts of its business to generate cash to avoid a default is a “sensible” strategy, according to Lutz Roehmeyer, a money manager at Landesbank Berlin Investment.Noble’s 2020 bonds rose 0.95 cent on Friday to 44.2 cents, the highest level since May 30, according to Bloomberg-compiled prices. Its shares climbed as much as 2.5% to 41.5 Singapore cents on Friday, paring declines this year to 76%.“With the extension, it seems clear that Noble will pay the upcoming coupons as they have sufficient liquidity,” said Abhishek Rawat, a director at China Merchants Securities Investment Management (HK) Co. “It remains to be seen whether the asset sales will be completed soon enough and can generate enough cash to repay maturities.”