NEWS - Noble Group plans $500 mln rights issue, further cost cuts; shares drop

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Vivian Teovivian.teo@fastmarkets.comJoint News Editor - Asia

Singapore 03/06/2016 - Noble Group has planned a rights issue to raise about $500 million and further cost-cutting initiatives, it announced on Friday.

The Singapore-listed Hong Kong-based commodities trader will offer one rights share for each existing share at S$0.11 ($0.08), a 63 percent discount from its closing price of $0.30 per share on Thursday.

Of the total 6.54 billion shares to be issued, biggest shareholder and chairman Richard Elman has agreed to take 625.5 million rights share, while China Investment Corp (CIC) has agreed to take 630.6 million rights share. CIC will get a second seat on Noble’s board.

The new shares that are not underwritten by either Elman or CIC are being underwritten by a group of banks including HSBC, Morgan Stanley Asia, DBS Bank, Société Générale and ING.

The rights issue is subject to the approval of shareholders and further details will be provided in due course, it noted.

The rights issue, together with the sale of its US energy retailer Noble Americas Energy Solutions (NAES) – announced on Monday – and the previously announced sale of low return assets and working capital reduction measures will together generate $2 billion in additional liquidity over the next 12 months, said Noble.

This liquidity will be available to further reduce net debt, and will also significantly improve the group’s financial flexibility, while also following through on Noble’s earlier commitment to raise $1 billion in liquidity by the end 2016, it added.

As part of an expanded cost reduction programme, which is in addition to previous cost reduction efforts announced, Noble also plans to reduce headcount following its exit from low returning businesses and assets.

Its planned headcount and expense reduction is in excess of 20 percent from current levels over the course of 2016. This incorporates the impacts from the planned sale of NAES.

"It is clear from the decisive capital raising actions that we have initiated post-refinancing that we have moved firmly to re-position our balance sheet. While we have focused on aggressively reducing debt even further, the combination of these initiatives also achieves our aim of enhancing our ability to fund our most dynamic growth businesses,” Elman said.

On the same day, the company also announced that Elman wishes to step down from his position within the next 12 months.

Noble’s board will set up a sub-committee - chaired by David Eldon, a non-executive director - to examine options for his succession and identify a successor to assume the role of non-executive chairman, it said.

Elman’s plan to step down follows the surprise resignation of CEO Yusuf Alireza earlier this week.

Trading of Noble’s shares was suspended for about an hour or so on Friday following the statement. When the halt was lifted, Noble’s share price fell as much as 13.3 percent to S$0.26 per share. It was the top traded counter on the Singapore bourse so far in the day, with 106.6 million shares changing hands.
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