Bonds issued by commodity trader Noble Group have fallen, mirroring a sharp decline in its share price, amid growing concerns about the company’s ability to manage its debt load and secure liquidity from banks.
Noble’s recently issued 8.75 per cent 2022 notes have fallen from 97 cents on the dollar this week to just 53 cents, pushing the yield up to about 27 per cent, according to Tradeweb.
Meanwhile, the company’s share price dropped a further 24 per cent on Friday to a 15-year low of S$0.66, having fallen by almost a third on Thursday. The company is now valued at $630m, down from more than $10bn seven years ago when it was one of the biggest commodity traders in the world.
The plunging price of Noble’s bonds and equity comes after it announced a first-quarter of loss of $130m and revealed it had yet to extend a key credit facility.
The company also said on Thursday that founder Richard Elman would be replaced as chairman by Paul Brough, a former partner at KPMG, who would lead a strategic review.
“There is risk that losses may continue due to the inability to effectively hedge the price risk in its coal business, and still-negative operating cash flows,” said Mervin Song, an analyst at DBS Bank. “Furthermore, there are questions surrounding Noble’s ability to secure sufficient liquidity from its key banks.”
Over the next year, Singapore-listed Noble must repay a $379m bond in March followed by an $1.14bn unsecured term loan three months later.
Speaking to analysts on Thursday, Noble’s chief financial officer Paul Jackaman said the trader was in discussions with its banks to ensure the group’s credit lines “provide the liquidity required to support the structure of the group’s business going forward”.
Over the past two years, Noble has been battered by a downturn in commodities markets and questions from analysts about its ability to convert profit into cash. Its accounting also came under scrutiny after a little-known research firm called Iceberg queried its financial reporting.
Noble has sought to revive its fortunes by replacing its chief executive, selling unwanted businesses and raising cash from shareholders to reduce its debt and provide more working capital.
The company has also strongly defended its accounting and dismissed the criticism of its financial reporting as the work of a disgruntled former employee. But it has continued to struggle.
“We do not see positive catalysts near-term barring an improvement in earnings or a strategic partner investing in the company,” said Bharat Shettigar, analyst at Standard Chartered in a note to clients on Friday.
“Also, the lack of prior warning on the results and management’s poor responses to some of the questions on the earnings call may lead some investors to adopt a ‘sell now, ask questions later’ approach,” he said
