Embattled commodity trader Noble Group Ltd. announced the sale of its U.S. oil-liquids business to Vitol Group, with proceeds to be used to pay down some of the company’s debt, while warning that it’s set to post a net loss of more than $1 billion for the third quarter.

The sale may generate cash proceeds of $582 million, according to a statement on Monday, with that sum described as illustrative. In a separate statement, Noble Group said it expected a total net loss of $1.1 billion and $1.25 billion for the three months to September, and that lenders had agreed to a two-month extension of a waiver related to a revolving-credit facility.

Noble Group, once Asia’s largest commodity trader, has been rushing to sell its oil business to pay back lenders in a struggle to survive. The deal is the latest in a string of disposals as executives pursue a shrink-to-survive strategy to meet obligations. The company’s crisis spans the past two years and its shares have lost about 90 percent since early 2015 as Noble Group draws back to a largely Asian business focused on coal, iron ore, freight and LNG.

“The core of their business has changed to some degree, but they’re still fighting to survive,” Nicholas Teo, a trading strategist at KGI Securities (Singapore) Pte, said by phone. “Management has been selling assets to lighten the debt load, and this oil deal is quite significant in size.”

Shares Sink

The trader’s shares have sunk 78 percent this year amid concerns that the company will default. Trading was halted on Friday at 38 Singapore cents, 2.6 percent down from the previous close, pending the announcement.

The deal for the oil business follows the sale of Noble Group’s smaller gas-and-power trading unit to Mercuria Energy Group Ltd., which was completed last month. Noble Group received less than anticipated from that deal -- having estimated Mercuria would pay $261 million for the unit, Noble received $102 million, with a further $83 million deposited into an escrow account.

Among highlights from the two statements on Monday:

The company expects that the proceeds from the oil-liquids sale and earlier gas-and-power sale will be enough to retire in full the Noble Americas Corp. secured borrowing base revolving facility, and the Noble Clean Fuels Ltd. secured borrowing base revolving facility

The final amount that Noble Group receives from the oil-unit sale is subject to escrow requirements

For the third quarter, the company expects an adjusted net loss from continuing operations of between $50 million and $100 million

Exceptional losses, including non-cash items, will total between $1.05 billion and $1.15 billion for the period

Cutting Debt

“The net proceeds will unlock capital from Noble Group’s balance sheet and generate significant liquidity,” the company said, adding that trading conditions remained challenging. “It is expected that the net proceeds will be made available to reduce Noble Group’s indebtedness.”

The firm in July disclosed the plan to sell the oil business, which trades about 2.5 million barrels a day of crude and refined products. A plan to announce a deal by end-September was delayed in part by the impact of hurricane Harvey in Houston, where the bulk of the oil business is located.

Earlier this month, the deal looked to be at risk when Vitol Group’s chief executive officer said negotiations were “very complicated.” In an interview with Bloomberg TV, Ian Taylor warned that the talks may not end in an agreement. Asked whether the stumbling block was price, he replied that it was “more the overall terms and conditions” of the deal.

Source:
courtesy of BLOOMBERG

by Jack Farchy and Jasmine Ng

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