Noble Group of Singapore has consented to sell off its energy distribution unit in North America. This step brings the commodities trader a step nearer to complete restructuring of the company. Noble needs $2 billion to be relieved of its debts. The trader wants to rebuild confidence of itself among investors post a bloody commodities downturn. To make matters worse, Iceberg Research questioned the company's accounts in the beginning months of 2015. The result was a share price collapse. The credit rating agencies also downgraded Noble's ratings.
Buyer and decision
Calpine Corporation, a US firm, has agreed to pay $1.05 billion for Noble's North American energy unit. The Noble Americas Energy Solutions sale includes the repayment of $248 million working capital. The deal was favored by the market. Shares of Noble increased almost seven percent during October 10 early trading.
According to Nirgunan Tiruchelvam, Religare Capital Markets, concern among investors for balance sheet and liquidity of Noble will assuaged after this sale. Tiruchelvam, an analyst, said that the strategy adopted by the company is to exit the asset weighed business and not pursue “overpriced assets” can be regarded as positive it would assist the company to concentrate on its principal operations.
Noble expects the closure of North American Energy Solutions transactions within December 2016. Net debt of the company jacketed up by $3.92 billion during the April to June period. In 2015, during the same period, the amount was $3.69 billion. Will Randall and Jeff Frase, the Co-Chief Executive Officers of Nobles, said the North Americasn Energy Solutions sale almost completes the capital raising initiatives which was announced in June by the company. They said the company after this divestiture, will continue its efforts to minimize debt. It will fund opportunities for growth in the high-return business.
A well thought out plan to slash bet can help to restore the stability lacking in Noble post multiple months’ surveillance. Yusuf Alireza, the CEO of Noble, unexpectedly resigned after he helped the company to secure credit facilities amounting to $3 billion. A cash call of $500 million was announced by the company soon after. Richard Elman, the founder of the firm, and also its chairman, had earlier informed in June about his intentions to step down within a year. Elman set up the company in 1986 and made it into one of world's largest commodity traders.