TF Briefing Slings and arrows

12 June 2017

TF Briefing

Slings and arrows Embattled commodities trader Noble has been suffering since 2015, when concerns were raised about its accounting processes in the middle of a commodity slump. It has endured ratings downgrades, a liquidity crisis, tumbling share price and a rising debt to earnings ratio. Its problems are coming to a head this month as a major credit line nears its expiry date. Noble has reportedly asked lenders on the $2 billion deal to extend it to the end of the year to give the company precious time to raise more cash. The trader has appointed Moelis and Morgan Stanley to review “strategic alternatives”. It has already made several key sales in an attempt to right-size. It has also tried to ease its liquidity problems so far this year with a $1 billion BBF in February as well as a $750 million bond in March, which it says was three times oversubscribed. But Noble’s first-quarter results, in which it recorded a $190 million loss, were disappointing – as was its warning that it might remain unprofitable until 2019. In the short term, Noble’s ability to refinance its large facilities will depend on the faith of its lenders. If Noble manages to sort out the near-term problem of its $2 billion facility maturity, its troubles are far from over. It has substantial refinancings to make next year. In March a medium-term note program expires, and a $1.1 billion revolving credit facility matures two months after that. With large refinancings on the horizon, Noble will need substantial support from lenders. But banks will become less keen to lend to the company if it cannot become profitable. The company made headway on this front in 2016, when it reported a modest profit for the year, after a $1.7 billion loss in 2015, so the last quarter’s results were a step back. Ratings agencies are cautious of that danger. Late last month, S&P downgraded the company further into junk territory (CCC+), pointing to the risk that it will fail to meet debt repayments.

The agency gave Noble a negative outlook to reflect “the potential that [its] cash flow and profitability will remain weak for the 12 months, with the risk of nonpayment of its debt obligations due to weakened access to funding. Fitch downgraded Noble twice in May, leaving it rated at B-, while Moody’s also dropped it by two categories, from B2 down to Caa1. See Trade Finance's Q1 2017 League Tables here

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Mandate Mill

Citigroup, BAML, Deutsche, Gulf International, HSBC, Natixis, Standard Chartered, SMBC, Crédit Agricole, Soc Gen, MUFG and First Abu Dhabi have been mandated to refinance the $1 billion, threeyear tranche of Oman Oil’s revolving credit facility. Export-Import Bank of India and KEXIM expect to sign a $9 billion MoU next week for infrastructural development and exports. Cocobod, Ghana’s state-owned cocoa regulator has mandated Rabobank, CA-CIB, Natixis, Standard Bank and SMBC to arrange its $1.3 billion annual pre-export receivables-backed trade finance facility. Commodities giant Louis Dreyfus has picked ABN Amro, HSBC, JP Morgan and Natixis as joint lead managers on a $300 million, six-year bond that is expected to close on 13 June. UKEF and Standard Chartered are expected to sign a €325 million ($365 million) loan to finance the construction of a second international airport in Uganda, south of the capital Kampala, which would support the country’s oil industry. Belgian stainless steel producer Aperam picked Crédit Agricole Corporate and Investment Bank and ING as co-ordinators, mandated lead arrangers and bookrunners on a five-year €300 million ($338 million) unsecured revolving credit facility.

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