Noble group poised to deleverage post Noble Agri stake sale

But the extent remains uncertain, says Fitch.

Fitch Rating says today that Noble Group Limited will be able to deleverage significantly if it completes the proposed sale of a 51% stake in Noble Agri Limited (NAL), a wholly owned agriculture subsidiary, to China's COFCO Corporation (COFCO). However, the extent of deleveraging remains uncertain until Noble details how it plans to use the sale proceeds.

Noble will receive an initial payment of around USD1.5bn in cash from the equity sale. Furthermore, it may no longer need to consolidate NAL's debt as it may treat NAL as an associate following the sale. Noble reported that NAL's net debt was around USD2.5bn at end-2013. This suggests a potential to reduce Noble's net debt, which stood at USD5.7bn at end-2013, by up to USD4bn.

However, we believe that Noble will invest part of the proceeds in its non-agriculture businesses, particularly the energy segment. We note that Noble has committed to invest USD500m in X2 Resources, a venture to acquire mining assets. This investment is in line with Noble's continued strategy of taking minority stakes in assets that provide it long-term off-take contracts. Noble's growth also means that its working capital needs will likely increase.

Noble's ratings momentum will depend on the return it obtains in the deployment of the sale proceeds and clarity about Noble's eventual leverage level following the completion of this transaction. The deal still faces regulatory hurdles from anti-trust bodies in multiple countries.

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