Noble Group warns of looming $5bn loss

Noble Group warns of looming $5bn loss

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Noble Group has warned it was on track to post a net loss of up to $5bn for 2017, as the embattled commodities trader boosted its hopes for survival by lining up $700m of financing.

The group said in a Singapore Exchange filing on Monday that it expected to report a net loss of as much as $1.9bn in the fourth quarter due to “challenging” operating conditions.

The Singapore-listed company, which reported net profit of $8.7m in 2016, said the total net loss for 2017 would be between $4.8bn and $5bn.

The group attributed $1.5bn of its fourth-quarter net losses to non-cash, mark-to-Market losses on derivatives, and adjustments to provisions.

The expected loss in the fourth quarter would leave Noble’s debts outweighing its assets. Noble said the board believed its restructuring plan “should restore shareholders’ equity” and “create a sustainable capital structure”.

The fall further into the red caps a bad few years for Noble as it seeks to restructure its debt.

Noble was once a key player in commodity trading, but saw its fortunes dented in 2015 when Iceberg Research, a small research group, produced several reports criticising the company and its inability to convert profits into cash. Noble has always defended its accounting.

As part of its restructuring, Noble said on Monday that it had reached an agreement in principle with its creditors — including ING as the lead bank — for a three-year finance facility of $700m.

It comes after the group last month proposed a restructuring that would see creditors take control of Noble in a debt-for-equity swap to halve its $3.4bn in senior debt. The move would all but wipe out existing shareholders.

If agreed, the deal would draw a line under a three-year crisis in which Noble has come under fire over its accounting and ability to manage its debt.

Noble said on Monday that “restructuring discussions with stakeholders continue to be productive”.

It said that the board was “satisfied that the group can continue as a going concern, until such time as the restructuring is completed”. Noble added that it would make another announcement on the implementation of the restructuring plan “in due course”.

The $700m will be made available once the restructuring plan takes effect, to support its commodities trading business, as long as the terms are acceptable to the banks.

Under the deal, lenders will control 70 per cent of the new company, and management up to 20 per cent. Investors, including founder and chairman emeritus Richard Elman, and China Investment Corp, a Chinese sovereign wealth fund, would hold just 10 per cent of the shares.


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