Noble Group Jettisons ‘Crown Jewel’ in Quest to Raise Funds

(Bloomberg) -- Noble Group Ltd. executives mapped out a road to recovery for the battered commodity trader as shareholders voted to approve the sale of a U.S. energy unit to raise funds, with Chairman Richard Elman describing the asset as one of the company's crown jewels. Its shares rose.

The company hopes to be profitable “as we were in the past” in the next one or two years, Elman told a special general meeting in Singapore on Thursday before shareholders voted in favor of the sale of Noble Americas Energy Solutions. Co-Chief Executive Officer Will Randall said that the unit became non-core after Noble Group lost its investment-grade rating.

Noble Group has been divesting assets and cutting costs to bolster its balance sheet and restore investors' faith after a share price collapse, a full-year loss and the downgrade to junk. The company said in a presentation that the sale of NAES, which was announced last month, largely caps a drive to raise $2 billion. The unit was previously described by former CEO Yusuf Alireza as a core holding.

“It's not the only crown jewel, it's one of the jewels we have,” Elman said. The decision to sell “was taken because of market conditions which not only affected Noble, but affected everyone in the commodity business.”

Calpine Buys

The unit will be sold to Houston-based Calpine Corp. for $800 million plus the repayment of working capital, which Noble Group has estimated to be an additional $248 million. The move follows a rights issue that raised about $500 million as well as the sale last year of the remainder of its agri business.

With the capital-raising initiatives, including the NAES disposal and rights issue, “we'll have more than enough liquidity to cover the upcoming maturities,” Chief Financial Officer Paul Jackaman told the meeting. Noble Group had short-term debt of about $2.3 billion as of June 30, compared with liquidity sources of $2.5 billion, according to the presentation.

“When we lost the investment grade, this went from core to non-core,” said Randall, who runs the Hong Kong-based company with co-CEO Jeff Frase. “We're trying to right-size Noble and get Noble prepared to move into the markets, which we expect to stay a certain way for many years.”

Noble Group sank 65 percent last year as the shares were hit by the collapse in commodity prices, its losses and claims -- rejected by the company -- that its accounts weren't fully reliable. The stock closed 8 percent higher at 17.5 Singapore cents on Thursday, paring the decline this year to 42 percent.

Morgan Stanley, which acted as an adviser in the NAES sale, has said the trader's refinancing needs will probably be $325 million when an estimated $2.3 billion falls due in May. The bank's base scenario assumes Noble Group gets $1.05 billion from the disposal, has $500 million from the rights issue and lowers working-capital needs by $400 million.

To contact the reporter on this story: Jasmine Ng in Singapore at jng299@bloomberg.net. To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Jake Lloyd-Smith