Noble Group, the beleaguered commodities trader, has announced plans for a heavily discounted $500 million rights issue and further cost cuts, and said that Richard Elman is to step down as chairman.
In the second wave of management changes this week, the Singapore-listed company said in a statement to the SGX that Mr Elman, a UK-born scrap dealer who founded Noble 30 years ago, “wishes to step down as executive chairman within the next 12 months”.
As part of a drive to generate $2 billion in additional liquidity over the coming year, Noble’s directors on Friday approved a fully underwritten one-for-one rights issue to raise up to $500 million to further reduce its large debt pile.
One new share will be issued for every existing Noble share at a price of S$0.11 each, representing a 63 per cent discount to Thursday's S$0.30 close. Mr Elman and China Investment Corporation will each take 9.6 per cent of the maximum number of shares to be issued.
Proceeds will add to the at least $1.5 billion that is expected to be generated from the company’s asset disposal and portfolio optimisation programme, which includes the proceeds of the sale of Noble Americas Energy Solutions, announced on Monday.
Noble will also continue to reduce operating costs, saying on Friday that it would cut headcount and selling, administrative and operating expenses “in excess of 20 per cent from current levels over the course of 2016”. That will incorporate the effects from the planned sale of NAES, and adds to the headcount reductions already planned alongside its exit from low-returning businesses and assets.
On Monday the Hong Kong-based company announced the resignation of Yusuf Alireza, its chief executive, and its plans to sell NAES – one of its few remaining crown jewels that is still profitable.
Bankers have estimated the value of the business, which sells gas and power to customers in North America, at $300 million to $400 million.
In May, Noble secured a $1 billion credit facility as part of $3 billion it raised in order to refinance debts due that month. However, people familiar with the deal said this was $500 million less than the amount it sought.
In December, Noble sold the remaining 49 per cent stake in its agricultural unit to Cofco, the Chinese state-backed grains trader, for $750 million.
Despite these efforts, Fitch last month cut Noble's credit rating to "junk" status, echoing moves by peers Moody's and Standard & Poor's.
A $1.2 billion writedown on long-term coal contracts - made as assessments of future energy prices fell - punched a hole in Noble’s 2015 annual results, resulting in a $1.7 billion net loss, its first annual swing into the red in more than two decades.
Noble has “moved firmly to re-position our balance sheet”, Mr Elman said in a statement on Friday, adding that in addition to aggressively reducing debt, the company’s capital-raising initiatives “also achieves our aim of enhancing our ability to fund our most dynamic growth businesses”.
He added: “Combined with focusing our operations on our high return market leading franchises, we are confident we now have the profile and capital structure to enable us to best capture the opportunities we see going forward.”
Copyright The Financial Times Limited 2016
