Here’s why battered Noble is willing to sell Noble Agri for a song

It will even face a US$450m write-down.

Currently, the purported US$700-750m sale price of Noble’s remaining 49% stake in its agri-joint venture is paltry compared to the $1.45b nabbed for for the sale of its 51% stake in 2014, according to a report by Jefferies. Further, the sale of Noble Agri to COFCO will force Noble to take an MTM write-down of about US$450.

However, Jefferies argues that the sale will boost Noble’s credit metrics and will better the company’s negotiating leverage with banks for credit refinancing in the future.

Even if the deal does close at US$750m, Noble’s pro-forma credit metrics would improve materially. Net debt/equity would be nudged upwards from 0.82x to 0.74x, and net debt/gross profit from 5.4x to 4.5x. 

Moreover, having cash in hand would improve prospects with rating agencies, but also give more legroom when negotiating with banks for credit line roll-overs.

Also, it would reduce Noble’s off-balance risk sheet since it would no longer need to provide corporate guarantees for Noble Agri.