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UPDATE 1-LPC-Banks reduce loan exposure to Noble Group
June 8, 2017 / 5:05 PM / 6 months ago

UPDATE 1-LPC-Banks reduce loan exposure to Noble Group

(Adds background in para 2 and context throughout)

By Tessa Walsh and Claire Ruckin

LONDON, June 8 (Reuters) - Around US$300m of a US$1.1bn revolving credit loan for Noble Group has been sold to funds in the secondary loan market as banks seek to limit their losses as the company faces a potential restructuring, banking sources said on Thursday.

The struggling commodities trader is trying to extend a separate US$2bn loan as finding an investor to recapitalise the business looks increasingly difficult, leaving debt restructuring or bankruptcy as the most likely options, several sources said.

Noble reported a surprise quarterly loss of US$129.3m for January-March and said that it will not be profitable for two years.

“I’m fairly bearish on the whole thing, there are rumours that the company will file for Chapter 11 in the next couple of weeks,” a secondary loan trader said.

Noble’s market value has shrunk to just over US$300m from US$6bn in February 2015, after Iceberg Research questioned its accounts. Its share price collapsed and credit ratings downgrades, management upheavals, asset writedowns, asset sales and a fundraising ensued.

The secondary price of the US$1.1bn loan, which was put in place in May 2015, has been volatile this year. The credit was trading at around 75% of face value at the beginning of the year, rose to around 90 at the end of March, but has fallen heavily in the last month, two loan traders said.

“There were a few trades at around 49 or 50, but the quotes are now lower in the 40s. It has fallen 45 points in the last month,” the secondary loan trader said.

Some banks are now unable to sell as the price has dropped too low to get approval for a sale, a distressed loan trader said. The company’s bonds have also collapsed to distressed levels.

Noble and its lenders have appointed legal counsel as the company struggles to maintain access to the US$2bn loan while time runs out to find an investor.

Noble Group has appointed financial restructuring adviser Moelis and law firm Kirkland & Ellis, which typically specialise in complex and aggressive debt restructuring situations, as well as Morgan Stanley.

“Noble has appointed the most active and aggressive restructuring advisers. When they were mandated, the secondary loan price dropped. The view from the market was that if they were hiring those guys, things must be pretty bad,” the secondary loan trader said.

Restructuring adviser Alvarez & Marshal and law firm Clifford Chance have been hired to advise Noble’s US lenders and Clifford Chance is acting for lenders in HK, Reuters reported.

Pitches for the European lenders took place on Wednesday, with Deloitte, PwC and FTI all vying for the mandate, according to one restructuring adviser.

Noble Group was not immediately available to comment. (Additional reporting by Sandrine Bradley; Editing by Christopher Mangham)

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