Singapore 23/12/2015 - Noble Group will sell its remaining 49 percent stake in its agriculture unit Noble Agri to China’s Cofco Corp for $750 million in cash, the major commodities trader announced on Wednesday.
Other than the upfront payment, it may also receive up to $200 million depending on the future growth of the unit, it said. Proceeds of the sale will be used to pay down debt.
The company’s net debt as at end-September 2015 would have been on a pro forma basis $1.8 billion after adjusting for readily marketable inventories and incorporating the transaction proceeds. Cash on would have been USD $2 billion and liquidity headroom would have been $2.7 billion as at that date, it said.
The sale will also terminate the need for Noble to provide the corporate guarantee which had previously supported Noble Agri’s borrowing, releasing a liability which was taken into account in its rating metrics, the company added.
“After completion of this transaction, Noble Group’s financial metrics will be well in excess of those required of an investment grade credit,” the company said.
The transaction also ensures that the group has comfortably exceeded its commitment - made six weeks ago at the time of its third quarter 2015 results announcement - to generate in excess of $500 million from asset disposals and/or other strategic/financial transactions, it added.
The sale is seen as helping Noble avert the downgrade of its credit rating to junk status by rating agencies. In November, Moody's Investors Service placed Noble Group Limited's ratings under review for a downgrade due to the company's weaker-than-expected liquidity profile and its still-high leverage in its quarterly results announcement.
Noble Group's overall group net profit had fallen 47.8 percent year-on-year to $194 million in January-September. A $208 million loss from its joint ventures and associates - primarily from Noble Agri – along with a $69 million loss from its metals and mining business had dragged down the company's bottom line.
Noble has been under pressure this year - its share price slumped after an anonymous blog by little known Iceberg Research questioned its accounting practices and amid investor concerns that falling commodity prices would affect the company's business.
Noble’s share price on the Singapore Exchange rose as much as six percent to 46.5 Singapore cents ($0.33) on Wednesday and was last at 0.445 cents, its highest in a month.