Noble Group to sell oil liquids unit to Vitol in $580m deal

Embattled commodities trader Noble Group announced Monday the sale of its American oil-liquids business to Vitol Group. (Reuters)
Updated 23 October 2017
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Noble Group to sell oil liquids unit to Vitol in $580m deal

SINGAPORE: Struggling commodities trader Noble Group agreed to sell its Americas-focused oil trading business to Vitol for about $580 million as part of a debt-cutting strategy, and warned of a big loss for its third quarter.
Monday’s move came after Reuters reported late on Friday that Vitol, the world’s largest oil trader, was nearing a deal to buy Singapore-listed Noble’s oil liquids unit.
Noble, whose founder Richard Elman took advantage of a commodities bull run to build it into one of the world’s biggest traders after starting it in 1986, is shrinking to an Asian-centric company focussed on its core coal trading, LNG and freight businesses.
It is slashing jobs and selling assets to reduce debt and win support from lenders after a crisis-wracked two years. In July it agreed to sell its smaller gas and power business to Mercuria.
“I guess the question is when are they going to basically turn around their business, which is quite key. If they can actually provide more details, what sort of assets they can still sell, that would be great,” said Annisa Lee, Nomura’s head of Asia ex-Japan’s flow credit analysis.
Hong Kong-based Noble was plunged into crisis in February 2015 when Iceberg Research questioned its accounts, and then the company was hit by a commodities downturn.
While Noble has stood by its accounts, the upheaval triggered a share price collapse, credit downgrades, a series of writedowns, as well as fund raising and management changes. Noble’s market value has plummeted to less than $400 million from $6 billion in February 2015.
Noble said gross proceeds from the sale of its oil liquids business would be $1.4 billion, and after deducting debt of about $836 million, cash proceeds would be about $580 million.
“It gives the company some positive momentum going into a liability management exercise and it likely raises recovery realizations under a restructuring scenario modestly,” said Todd Schubert, fixed income analyst at Bank of Singapore.
In July, Noble announced an up-to-$1 billion disposal plan for assets outside North America over the next two years as Chairman Paul Brough, a restructuring specialist appointed in May, sought to tackle Noble’s more than $3 billion of debt.
“Conservative liquidity management and constraints placed on the group’s access to trade finance lines led to disruption costs and prevented the group from taking advantage of profitable trading opportunities,” the company said on Monday.
Its stock fell 10 percent on Monday, extending losses to 80 percent this year.
Noble warned of a total net loss of $1.1 billion to $1.25 billion in the three months ending September, citing non-cash losses and underlying trading results.
This follows a $1.75 billion net loss reported in the period between April and June.
Noble has been locked in negotiations with its core lenders to support a $2 billion credit facility, secured on its inventories and working capital.
“Whilst no assurance can be given as to the outcome of these discussions, the group believes that these are open and constructive, and are moving forward,” it said.
In August, ratings agencies S&P and Moody’s cut their credit ratings on Noble, citing high default risks.
Noble is a big player in the global physical oil market, trading crude and refined products. But its operations shrank this year due to higher prices and liquidity constraints.


French state-owned bank drops plan to aid trade with Iran

Updated 24 September 2018
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French state-owned bank drops plan to aid trade with Iran

  • US-imposed sanctions sanctions iare making trade with Iran increasingly difficult for European companies - such as Volvo
  • US is renewing sanctions on Iran after withdrawing from a nuclear deal forged in 2015 between Tehran and world powers

PARIS: French state-owned bank Bpifrance has abandoned its plan to set up a mechanism to aid French companies trading with Iran, in the face of US sanctions against Tehran.
Earlier this year, the bank had said it was working on a project to finance French companies that wished to export goods to Iran despite US sanctions.
“It’s put on hold,” said Nicolas Dufourcq, Bpifrance’s chief executive. “Conditions are not met (...) Sanctions are punitive for companies.”
Bpifrance was working on establishing euro-denominated export guarantees to Iranian buyers of French goods and services. By structuring the financing through vehicles without any US link, Bpifrance thought it was possible to avoid the extraterritorial reach of US legislation.
Dufourcq’s latest comments show how the scope of the sanctions is making trade with Iran increasingly difficult for European companies.

Swedish truckmaker Volvo has been forced to stop assembling trucks in Iran as it can no longer get paid with US sanctions taking bite.
Volvo spokesman Fredrik Ivarsson said due to the sanctions Volvo could no longer get paid for any parts it shipped and therefore had taken the decision to not operate in Iran.
"With all these sanctions and everything that the United States put.. the bank system doesn't work in Iran. We can't get paid... So for now we don't have any business (in Iran)," he said.
The US is renewing sanctions on Iran after withdrawing from a nuclear deal forged in 2015 between Tehran and world powers. Washington reimposed some of the financial sanctions from Aug. 6, while those affecting Iran’s petroleum sector will come into force from Nov. 4.
Even though several European countries have said they are seeking to protect their companies from the sanctions, several major companies including oil company Total, Air France-KLM and British Airways have announced they would suspend activities in Iran.
German officials have in recent weeks advocated for the creation of an independent system for cross-border payments to make trade with Iran possible even with the US sanctions.
European Union diplomats have said US President Donald Trump’s positions on trade and on Iran were fueling a rethink about the EU’s dependency on the US financial system.
However, European countries appear to be struggling to find or agree on effective options to tackle the issue.