By REUTERS
Shares and bonds of Asia’s biggest commodities trader, Noble Group, rallied on news that Chinese food giant COFCO is in advanced talks to take full ownership of the firm’s agri-business, which may help improve Noble’s cash position.
Noble shares rose as much as 11.5% in early trade before shedding some of their gains.
“If they do decide to sell the agri-business, the money would probably come in useful, but the devil is in the detail,” said Carey Wong, an analyst at OCBC Investment Research, who has a hold rating on Noble.
“Assuming they sell everything (in the agri-business), they may not have exposure to a sector that is a bit positive compared to industrial metals and energy. That is also what the market would look at.”
Noble Group’s five-year US dollar bonds, which are maturing in 2020, traded at 68.0/69.725, up 5 points overnight, while its perpetual bond was quoted at 45/48 on Wednesday, up 2.2 points overnight.
Reuters reported on Tuesday that COFCO was in talks to buy the remaining 49 percent of Singapore-listed Noble’s agri- business for about US$700 (RM3.30 billion)-US$750 million (RM3.25 billion), having acquired a 51% stake in April 2014 for US$1.5 billion.
The move suggests Noble is trying avert the looming threat of a downgrade to a junk rating after Standard and Poor’s last month cited worries about its weakened liquidity and leverage positions.
S&P followed Moody’s Investors’ Service in flagging a possible drop to junk grade, underscoring bond market concerns about pressure on Noble’s cash flows and its share buyback strategy.
The trader’s shares have lost about two-thirds of their value since mid-February, when blogger Iceberg Research alleged the company had inflated its assets by billions of dollars by misrepresenting the value of contracts.
Noble rejected the claims and board-appointed consultant PricewaterhouseCoopers found no wrongdoing.
— By Saeed Azhar & Daniel Stanton
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