Jamalco future unclear as Noble Group restructures
Published:Wednesday | November 21, 2018 | 12:00 AM
The Noble Group will move its stake in Jamalco along with other non-core assets, to a new subsidiary as part of a restructuring plan to turn around the loss-making company.
The group will operate two main entities under a new holding company, referred to as New Noble an asset company which will hold investments such as Jamalco; and a trading company for the group's core businesses. The precise timeline for execution of the plan is unclear.
The company said in its financial report released this week that Jamalco was one of its well-performing assets, but gave no details on what the restructuring might mean for the future ownership of the alumina company, over which it has management control.
Noble Group, which is headquartered in Hong Kong, but listed on the Singapore stock market, manages a portfolio of global commodities covering industrial and energy products. It holds a 55 per cent stake in Jamalco, with joint-venture partner Clarendon Alumina Production Limited, a company owned by the Jamaican Government, holding the other 45 per cent.
In its most recent earnings report released this week, Noble said it would separate New Noble's interests in Harbour Energy, Jamalco, Noble Plantations and its vessels from the group's core business, which includes, but is not limited to, its hard commodities, freight and LNG businesses "such that there is an effective ring-fencing".
Efforts at comment from Jamaican bauxite and government officials as to what the restructuring implies for Jamaica were unsuccessful. Opposition spokesman Phillip Paulwell is urging the Government to be "proactive", in ensuring that arrangements made in the bankruptcy process are aligned with Jamalco's interests.
"I'm very concerned about the future of Noble, though less concerned about Jamalco as it's the only positive performing asset of the Noble Group," Paulwell said Thursday.
""As the alumina business is attractive now, with good prices, the GOJ should not panic, but be sure-footed and examine various options, including initiating discussion with other potential partners. I will be willing to work with the minister to share my views as, again, we should approach this in a united way," he said.
Reports out of Asia say the restructuring plan would cost US$3.5 billion to execute. Noble's creditors are expected to end up with 70 per cent of the company under a debt-for-equity swap.
"The proposed restructuring provides a stable platform for New Noble with a sustainable capital structure to deliver long-term value to all of its stakeholders," said Noble in its financial report this week, amid losses at the company.
The Noble Group reported a US$99-million net loss over three months to September 2018 on revenues of US$1.2 billion, which represented an improvement over the $1.17 billion net loss a year earlier. Over nine months, its losses contracted to US$299 million, compared with US$3.05 billion a year earlier.
Jamaica was cited as having a positive impact on the results.
"In particular, the group's Jamalco joint venture delivered solid results in the strong alumina price environment," said Noble. More broadly, it said the metals, minerals and ores segment also benefited from "stable profitability and volumes" from its special ores and minerals business as well as its base metals operation in Asia.
The new asset company formed under the restructuring programme will be capitalised with US$200 million preference shares and a US$700 million bond. The trading company will offer a US$300-million bond, while one of its subsidiaries will raise US$700-million bond and raise US$800 million in new loans which Noble referred to as "new money debt".
The restructuring plan approved by creditors on November 8 will see existing shareholders retaining 20 per cent of the New Noble group, its management will hold 10 per cent, and the creditors will take 70 per cent.
The company, as of this week, is operating with negative capital of US$1.1 billion, while its accumulated losses amounted to US$4.32 billion as at September 2018.
"The restructuring is expected to result in a sustainable capital structure, and provides for a committed trade finance and hedging facility which is critically important for the group to continue to trade, reposition its business and expand on its position as a leading industrial and energy products supply chain manager in Asia Pacific and the Middle East," said Noble.