SINGAPORE (May 31): DBS believes Noble Group will be able to refinance its upcoming borrowing base facility in June, contrary to the view of some market participants.
As long as China Investment Corp (CIC) remains a shareholder, analyst Mervin Song says there is hope for Noble's bankers that a key backer will provide support in the worst-case scenario.
“Noble should be able to refinance its credit facilities, albeit smaller in size and with higher borrowing costs,” says Song in an unrated report on Wednesday.
By lending on a secured inventory basis, the various banks should have sufficient collateral to continue backing Noble, he adds.
In addition, given the negative sentiment surrounding Noble at the moment, a potential investment by a strategic partner may provide confidence to investors and bankers about the strength of its business model and value of its assets.
But given Noble’s low share price, there remains some risks that a strategic investor may offer unfavourable terms, which may dilute existing shareholdings in the near term.
Still, the broker is suspending coverage on the stock given uncertainty over the outcome of the group’s strategic review, and the impact from the recent credit rating downgrades, as well as risks that it continues to report losses into 2018.
“These factors make it difficult to anticipate the potential outcomes for Noble,” says Song.
Shares of Noble are down 1 cent at 36 cents.
