Noble Group Warns on Outlook After Posting $4.9 Billion Loss

(Bloomberg) -- Noble Group Ltd. posted a full-year loss of $4.94 billion for 2017 and warned that further writedowns may yet be in store as the commodity trader battles to survive, with executives pressing ahead with a debt-for-equity rescue plan that's facing increased resistance.

“Further additional non-cash valuation adjustments may be recorded,” the company said in a statement in Singapore. The final figure compares with a range of $4.78 billion to $4.98 billion given in a warning last week. In a supplementary statement, Noble Group said there's “significant uncertainty” about its ability to achieve its plans, including the restructuring.

The company that was once Asia's largest commodity trader has been brought to the brink of collapse after years of losses, and executives led by Chairman Paul Brough are now urging a restructuring proposal. If agreed, the debt-for-equity plan will hand control to a group of creditors, but the initiative is facing opposition from some shareholders. And in a fresh blow just hours before the earnings, a group of perpetual bondholders said they'd fight the plan too.

“The group has made significant progress on the actions determined under the strategic review, which commenced in May 2017, while continuing to manage the franchise within the existing constraints of availability of trade finance and liquidity,” it said. “Discussions with stakeholders continue to be productive.”

Read more: a QuickTake on Noble's survival plan

Ahead of the statement, the prospect of a near $5 billion annual loss for a Singapore-listed company spurred speculation the figure may be a record for the city-state. “I don't think we have heard of a company that's posted a bigger loss,” said Jane Fu, a sales trader at CMC Markets.

Cash Totals

The full-year loss included $1.05 billion from operations the company has sold as it shrinks to survive, as well as $3.2 billion in exceptional items from businesses that remain, according to the statement. Cash and equivalents fell to $492 million at end-December, from $1.2 billion a year earlier.

Group tonnage and revenues in continuing operations -- including coal, freight and iron ore, which will underpin a revamped business -- were down 28 percent and 21 percent from 2016, it said. The company highlighted a “challenging operating environment, which resulted from the constraints of availability of trade finance and liquidity.”

Under the restructuring plan, which is backed by some senior creditors, about half of the Hong Kong-based company's $3.5 billion in debt will be switched into new equity, while perpetual bondholders are being offered just a few cents on the dollar. All existing shareholders will get a 10 percent holding, and management could own as much as 20 percent.

The plan's spurring a fightback. The group of perpetual bondholders resisting the push have hired Latham & Watkins LLP to negotiate a better deal, according to a statement earlier on Wednesday. Separately, one of the top shareholders, Goldilocks Investment Co., has complained of massive dilution, called the losses “extremely shocking”, and is appealing for other investors to fight.

Click here for a Gadfly commentary on Noble Group's prospects.

In the supplementary statement, Noble Group warned that whether it's able to continue as a going concern depends upon obtaining the necessary approvals for the restructuring plan, complying with the terms of new senior debt instruments, and improving its gross margins while reducing expenses.

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, James Poole

©2018 Bloomberg L.P.