Hong Kong - Noble Group Ltd.’s stock and bonds rose Thursday after
people familiar with the matter said the embattled commodity trader has
approached lenders to replace a credit facility with a new $2 billion loan. Now
investor focus shifts to bank support for that lifeline.
Mitsubishi UFJ Financial Group Inc. is said to be arranging
the new 364-day revolving credit facility, the people said, asking not to be
identified because they aren’t authorized to speak publicly.
Noble Chief Financial
Officer Paul Jackaman said last week the company is in talks with lenders over
renewing a secured borrowing facility that’s been extended to the end of June.
The new loan is to refinance that facility, according to Glenn Ko, head of
Asia desk trading strategy at HSBC Holdings Plc in Hong Kong.
While Noble’s stock climbed 3.6 percent as of 11:18 a.m. in
Singapore, it is still down about 50 percent this month after the
firm reported last week a net loss of $129 million in the first quarter.
Its bonds due in 2022 rose 3.2 cents to 55.1 cents, compared with 98.2 cents at
the start of the month.
Paul Brough, a British-born former KPMG LLP executive, was
appointed chairman of Noble last week, taking over from founder Richard
Elman. Its credit rating was cut further into junk territory this week.
“The company has always been highlighting strong banking
relationships in the past and even during the tough times they managed to get
bank funding,” said Raymond Chia, head of credit research for Asia ex-Japan at
Schroder Investment Management in Singapore.
“This time round it
could be more uncertain given that quite a number of things are happening at
the same time including first-quarter losses, new management, timing of those
events six weeks after the recent bond sale.”
A media representative for Noble Group and a spokeswoman for
MUFG weren’t able to immediately comment when called and emailed.Click here for a story on how Noble’s turmoil is prompting
queries on its disclosure to bond buyers
“If the banks are comfortable loaning against the trading
book it would be a huge vote of confidence across the whole capital structure,”
said Andy DeVries, analyst at CreditSights Inc. “I assume the banks not
only have access to more details on the trading book positions than the public
does but the banks have experts that specialize in these positions too.”
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Noble is offering investors 185 basis points over the London
interbank offered rate on an $800 million uncommitted tranche and 195 basis
points over Libor on the remaining $1.2 billion committed tranche, the people
said. The pricing is in line with last year’s deal, they said. The terms may
change given recent downgrades by rating firms, according to the people.
Fitch Ratings cut its credit rating on Noble deeper into
junk territory on Tuesday, saying it will need to source external financing in
the first half of next year. That came after Moody’s Investors Service took a
similar step.
Noble’s shares are on course for a third straight day of
gains, the longest rising streak since March, after losing almost half their
value last week.
The fact that there hasn’t been a spike in pricing on the
loan is positive, said Todd Schubert, head of fixed-income research at Bank of
Singapore, the private banking unit of Oversea-Chinese Banking Corp. “However,
the loan isn’t completed and the market will look to see to what extent terms
are modified.”