Noble to sell oil liquids unit to Vitol, flags loss of $1.2bn

Struggling commodities trader Noble Group agreed to sell its America-focused oil trading business to Vitol for about $580mn as part of a debt-cutting strategy, and warned of a big loss for its third quarter.Monday’s announcement 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. Noble, founded in 1986 by Richard Elman who took advantage of a commodities bull run to subsequently build it into one of the world’s biggest traders, is shrinking to an Asian-centric company focused on coal trading, LNG and freight. It is slashing jobs and selling assets to reduce debt and win support from lenders after a crisis-wracked two years.In July it agreed to sell its smaller gas and power business to Mercuria.“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,” said Annisa Lee, Nomura’s head of Asia ex-Japan’s flow credit analysis.Hong Kong-based Noble was plunged into crisis in February 2015 when Iceberg Research questioned its accounts, and then it 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 $400mn from $6bn in February 2015. Noble said it would receive gross proceeds of about $1.42bn from the planned sale of its oil liquids business, while net proceeds would have been about $580mn after repaying $836mn of loans. It said the amount calculated is for “illustrative purposes” and is based on its end-June financials and includes proceeds from its gas and powerbusiness.“It gives the company some positive momentum going into a liability management exercise and it likely raises recovery realisations under a restructuring scenario modestly,” said Todd Schubert, fixed income analyst at Bank of Singapore. In July, Noble announced an up to $1bn 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 $3bn 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 on Monday. Its stock fell 7% on Monday and was down 5.6% yesterday, extending losses to about 80% this year. In a one-line statement, Vitol US Holding Co confirmed it had agreed to acquire Noble Americas Corp subject to certain conditions and referred to Noble’s statement on the deal.Noble bonds due 2020 were higher by two points at 39/41 cents on the dollar.As recently as April, the 2020s were trading around 97 cents on the dollar.Noble warned of a total net loss of $1.1bn to $1.25bn in the three months ending September, citing non-cash losses and underlying trading results. This follows a $1.75bn net loss for April-June. Noble has been locked in negotiations with its lenders to support a $2bn 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. In August, S&P and Moody’s cut their credit ratings on Noble, citing high default risks.