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Noble seeks major funding breakthrough without asset sales

SINGAPORE: Trading house Noble Group is under no pressure from banks to sell assets and is not planning further divestments as it negotiates more than US$4 billion (S$5.5 billion) of new and refinanced loans with lenders, a senior source close to the process said.

The renewal of Noble's loans is seen by analysts as the most significant development this year for the trader of commodities ranging from iron ore to oil, after suffering a slide in investor confidence over the past year.

Ratings agencies downgraded Noble to "junk" status last year after an analyst accused it of accounting irregularities and commodity prices slumped.

In January, Noble reported its first annual loss in nearly 20 years and ratings agency Standard & Poor's said that could complicate refinancing.

This week, Noble surprised the market with bigger refinancing plans than expected. Sources said it was seeking US$2.5 billion to US$3.25 billion via an oil inventory-backed loan to replace an existing $1.1 billion facility.

It is also seeking up to US$2.2 billion through a revolving credit facility to replace an existing US$1.2 billion loan.

Several industry and banking sources have suggested Noble may try to provide banks with comfort by promising more assets sales, such as its highly profitable Noble Americas Energy Solutions business.

NOT FOR SALE

But a senior source close to Noble's bank refinancing talks said there was no requirement to dispose of any assets as part of the discussions, after Noble sold the remaining 49 per cent of Noble Agri to Cofco for US$750 million.

"Noble Americas Energy Solutions is a well-acknowledged profit centre for Noble and naturally the market may suspect it is an asset that could be monetised. But Noble is currently not engaged in any sale process at this time," the source said.

An external spokesman for Noble also said the company was not looking to sell Noble Americas Energy Solutions.

Noble is also working on assessing several alternative strategic plans to strengthen its balance sheet further.

The options could include equity issuance such as in the case of rival Glencore, or options such as various forms of partnership with private equity firms.

On the financing side, Noble intends to move over time to fund its business increasingly through secured rather than unsecured borrowing.

"Noble is moving towards financing arrangements which are more in line with what competitors do," the senior source said.

The oil inventory-backed loan discussions are being led by Mitsubishi UFG financial group and Noble plans to make more oil available as collateral under the new facility.

"Noble doesn't plan to reduce its inventories," the source said. "The banks see Noble's financial situation better than anyone else. Noble provided them with as much information as they required."