The Board of Directors (the “Board”) of Noble Group Limited (the “Group”) provide an update on the Group’s operating performance and profit guidance for the three months ended 30 September 2017 (“3Q 2017”) and provide an update on ongoing discussions with the Group’s lenders.
Progress Update on Strategic Review
As previously announced, the Board has given priority to a further reduction in the Group’s indebtedness as part of the strategic review. The Group’s debt repayment capability is comprised of:
- Cash flows from the Hard Commodities , Freight and LNG businesses;
- Net proceeds from the monetisation of the Global Oil Liquids and North American Gas & Power businesses, as described in more detail below; and
- Proceeds from the proposed Asset Disposal Programme announced on 26 July 2017. The asset group comprises certain assets held outside of North America. At this time, no binding agreement has been entered into in relation to any disposals under this programme, and further developments will be announced, as they arise, in accordance with the requirements under the SGX listing rules.
The strategic review also continues to explore several alternatives, including recapitalising the Hard Commodities, Freight and LNG businesses, with a view to maximising value for the benefit of the Group’s stakeholders.
To date, the strategic review has been undertaken in the context of managing the Group’s liquidity challenges while at the same time formulating a plan for a turnaround of the Group’s remaining businesses. The Group will make further announcements as progress continues to be made on executing the actions from the strategic review.
Monetisation of the Global Oil Liquids and North American Gas & Power Businesses
The Group has taken steps towards monetising its Global Oil Liquids and North American Gas & Power businesses with the expectation that the proceeds will be sufficient to retire in full the Noble Americas Corp senior secured borrowing base revolving credit facility (“NAC BBF”) and the Noble Clean Fuels Limited senior secured borrowing base revolving credit facility (“NCFL BBF”). Net proceeds following retirement of the NAC BBF and NCFL BBF will be available to reduce the Group’s remaining debt. The monetisation plan has been enacted over the past several months via three separate processes:
- Sale of the North American Gas & Power business. The North American Gas & Power business was conducted through Noble Americas Gas & Power Corp and was a subsidiary of NAC;
- Proposed sale of NAC, a United States incorporated wholly-owned subsidiary of the Group. The Global Oil Liquids business is primarily conducted through NAC; and
- Wind-down of certain remaining Global Oil Liquids working capital balances within NCFL, a UK incorporated wholly-owned subsidiary of the Group.
The Group has also agreed certain milestones to reduce utilisation under the NAC BBF and NCFL BBF, and the step-down of these facilities is proceeding in accordance with these milestones. Following completion of the monetisation plan, the NAC BBF and NCFL BBF are expected to be retired in full.
A summary of the actions undertaken to monetise the Global Oil Liquids and North American Gas & Power businesses and progress on these processes are as follows:
- Sale of Noble Americas Gas & Power Corp: the Group closed the sale of Noble Americas Gas & Power Corp to Mercuria Energy America, Inc. (“Mercuria”) on 29 September 2017. Further information is available in the Group’s announcement “Proposed Disposal of Noble Group’s Remaining North American Gas and Power Business” released 2 October 2017. On closing, proceeds were paid by Mercuria to NAC, with the proceeds used for repayment of loans drawn under the NAC BBF. The release of cash in escrow and any final adjustments to the consideration received, in accordance with the terms and conditions of the stock purchase agreement, will be announced upon final determination of the consideration;
- Sale of Noble Americas Corp: the Group today has separately announced that it has entered into a binding stock purchase agreement for the sale of its wholly-owned subsidiary NAC to Vitol US Holding Co. The Global Oil Liquids business is primarily conducted through NAC. The sale is subject to, amongst others, approval by Group shareholders, expiration of the Hart Scott-Rodino waiting period, certain other required regulatory approvals and lender approval under the NAC BBF. Further information is available in the Group’s announcement “Proposed Disposal of All the Issued and Outstanding Capital Stock of Noble Americas Corp” released concurrently with this announcement. The sale is expected to close by the end of 2017 and prior to the 15 January 2018 maturity date of the NAC BBF; and
- Wind-down of certain Global Oil Liquids working capital within Noble Clean Fuels Limited: the Group is in the process of winding down certain remaining Global Oil Liquids working capital balances within NCFL. This process includes the collection and settlement of working capital items and the roll-off or settlement of certain contractual commitments. The wind-down process is expected to conclude by the end of 2017 and the Group expects to retire the NCFL BBF prior to the 17 February 2018 maturity date. As at 30 September 2017, the Group had repaid all loans drawn under the NCFL BBF and utilisation under the facility related entirely to the issuance of letters of credit. Following the completion of the wind-down process, the Group will retain its existing LNG and Asia-focused distillates businesses, which operate under NCFL and which remain complimentary to the Hard Commodities businesses. Working capital financing requirements for the retained LNG and Asia-focused distillates businesses will be financed under the Group’s existing trade finance lines.
Purely for illustrative purposes, excluding net proceeds from the wind-down of certain remaining Global Oil Liquids working capital balances within NCFL and based on the latest announced unaudited consolidated financial statements of the Group as at 30 June 2017, aggregate proceeds to the Group from the proposed sale of NAC5 would have been approximately US$1,418 million and net proceeds, following repayment of loans drawn under the NAC BBF, would have been US$582 million6 . The timing of cash proceeds from the proposed sale of NAC will be subject to escrow requirements and the final consideration received will take in to account operating expenses of NAC borne by the Group to the closing date and other adjustments in accordance with the terms and conditions of the stock purchase agreement.