Fitch: Disposal of Noble Agri May Provide Relief to Noble's Liquidity

OREANDA-NEWS. Fitch Ratings says today that the disposal of Noble Group Limited's (Noble, BBB-/Stable) remaining 49% stake in Noble Agri Limited (Noble Agri) for USD750m will reduce pressure on Noble's current tight liquidity position because the company says it will use the entire proceeds of the sale to pay down debt.

The stake sale, once completed, will allow Noble to improve its balance sheet structure immediately. If we assume all proceeds will be used toward debt reduction, its ratio of working capital (current assets minus non-debt current liabilities) to total debt (including 50% of perpetual capital securities as debt) will improve to 1.33x from 1.16x at end-3Q15 (2014: 1.14x), and its total bank debt will fall to USD3.1bn from USD3.4bn at end-3Q15.

Noble's liquidity will also rise to USD2.26bn, or 130% of inventory (compared with 86% at end-September 2015 as noted in "Fitch: Noble Group's Liquidity Just Enough to Support Rating" published on 20 November 2015). This would improve Noble's liquidity position ahead of the repayment of the USD458m (as of 30 September 30 2015) of senior notes due before May 2016 and provide additional headroom to cover liquidity needs arising from commodity price fluctuations.

Noble on 23 December 2015 said it has agreed to sell the 49% stake in Noble Agri to its partner China-based COFCO Corporation, which first bought a 51% stake in Noble Agri last year. The transaction is subject to the approval of Noble's shareholders.