Noble Group Targets $500 mln cash call, Founder to Step Down

Chairman Richard Elman to step down within 12 months; moves comes just days after CEO quit.

Noble Group is raising about $500 million from a deeply discounted share issue, cutting jobs and losing its Chairman Richard Elman who is stepping down, capping a tumultuous week for the embattled commodities trader.

Friday's announcement of the planned departure of Elman, Noble's founder and its largest shareholder owning a fifth of the company, comes just days after its CEO quit and Asia's biggest commodity trader flagged the sale of its energy distribution business, its crown jewel.

Noble's troubles started more than a year ago when its accounts were questioned, sparking a dramatic collapse in its share price and ratings agency downgrades of its debt to junk, forcing the company to sell some of its prime assets to allay financing worries and weather the commodities downturn.

This week's events have raised fresh questions about its financial health and strategy just after it finalised $3 billion in credit facilities, a crucial move that helped it to refinance its entire debt maturing this year.

The Singapore-listed company's shares fell as much as 15 percent to the lowest in 13 years on Friday, while its bonds soared.

"This is a boost to the balance sheet but at what cost to shareholders?" said Nirgunan Tiruchelvam, analyst at Religare Capital Markets. "We also have to figure out what Elman's plans are," he said.

Noble is raising S$718.9 million ($522 million) in a one-for-one rights issue priced at 11 Singapore cents each, a 63 percent discount to Thursday's closing price. Elman is taking up only 9.6 percent of the new shares, while sovereign wealth fund China Investment Corp (CIC) is taking up its full entitlement. (http://bit.ly/1VB5grN)

Elman, 76, who grew Noble into one of the world's biggest traders of commodities from coal to iron ore to oil in a bull run since setting up the group in 1986, will resign within 12 months and has asked the board to look at succession options.

Elman's stake in the company will drop to about 16 percent after the rights offer, according to Reuters calculations.

DEBT WORRIES

Noble's debt worries surfaced after Iceberg Research accused the Hong Kong-headquartered trader in February 2015 of overstating its commodity contracts by billions of dollars, claims which the firm rejected. It started legal action against a former employee who it had fired in 2013 and was linked to Iceberg.

Since the first accusations, Noble has booked impairments of over $1 billion, sold its agribusiness and lost its investment- grade credit rating in one of the worst commodity downturns in decades. Noble's market value has plunged by nearly 80 percent, or S$6.4 billion, to S$1.75 billion, while its debt financing costs have risen.

"The commodities cycle has been vicious over the past few years. It has hit some commodities, notably coal and minerals, especially hard," said John Driscoll, chief strategist at JTD Energy Services.

Noble also unveiled plans to cut headcount and expenses by over 20 percent. CIC, which holds nearly 10 percent of the firm, will now be entitled to a second non-executive director on the board.

The commodities company aims to generate $2 billion in additional liquidity over the next 12 months from the rights issue and other measures, such as the sale of low-return assets and working capital cuts to help trim its $3.7 billion net debt.

Noble executives told analysts this would be enough to meet the company's debt refinancing for 2017.

The rights issue is being underwritten by HSBC, Societe Generale (SGE.SG), Morgan Stanley (MS), ING Bank and DBS Bank. ($1 = 1.3769 Singapore dollars)

Reporting by Anshuman Daga