Noble Group is taking measures to bolster its balance sheet at a time when the accounting practices of Asia’s biggest commodity trader are being questioned and commodity markets are caught in a slump, company executives said.
On Thursday, Noble announced the repurchase of portions of two bonds in a move to trim its debt. The company has repurchased $31.6 million of its 6.75 percent U.S. dollar fixed rate senior notes due 2020, representing about 2.6 percent of the total principal amount outstanding immediately before the repurchase, it said. Noble has also bought back $1 million of its 3.625 percent US dollar fixed rate notes due 2018, or 0.26 percent of the total principal outstanding.
“Right now for all of our stakeholders, whether it’s our bond investors, our shareholders, our banks – the most important message to deliver to the market and the most important priority – is the strength of our balance sheet and liquidity,” Noble‘s CEO Yusuf Alireza said.
Alireza, a former Goldman Sachs banker, was speaking soon after Noble‘s shareholders approved the sale of its remaining 49 percent stake in its loss-making agribusiness to China’s COFCO for $750 million.
Hong Kong-headquartered Noble was thrust into the spotlight a year ago when Iceberg Research published the first of three detailed reports on it, alleging it inflated its assets by billions of dollars by inaccurately representing the value of its contracts, a charge Noble has rejected.
Noble‘s shares have shed about three-fourths of their value over the past year to just $1.3 billion, hit by the commodity market slump and the accounting issues, prompting Standard & Poor’s and Moody’s to cut its credit rating to junk.
This has raised financing worries at Noble, which has about $2.5 billion worth of debt due this year, according to Thomson Reuters LPC data. Noble‘s bonds and credit default swaps are trading at depressed levels, but Alireza blamed this on illiquid markets.
“From a management’s perspective, from a board’s perspective, our No. 1 priority continues to be, to be cash flow positive and to decrease our debt,” he said.
“We’re in a position where we have the liquidity, but we are also in a position where we have the support of our banks to continue to fund our business,” Alireza added.
Some shareholders questioned Chairman and founder Richard Elman about Iceberg’s reports,Noble‘s shares, which are at 12-year lows, and its debt levels at Thursday’s meeting, which was attended by nearly 300 investors, but Elman urged them to ignore rumours and have faith in the company.
“What surprises us frankly is why everybody pays so much attention to a tweet. If the world is being reduced to tweets, I think we’ve all got a problem,” said Elman.