Jamalco co-owner Noble looking to slash US$1b in debt
Published:Wednesday | December 22, 2021 | 12:10 AM
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Cash-strapped Noble Holdings, the foreign joint venture partner in the Jamalco alumina refinery, plans to reduce its overall debt from US$1.5 billion to US$500 million amid steps to grow its operational assets, primarily held in Jamaica. Noble said...
Cash-strapped Noble Holdings, the foreign joint venture partner in the Jamalco alumina refinery, plans to reduce its overall debt from US$1.5 billion to US$500 million amid steps to grow its operational assets, primarily held in Jamaica.
Noble said its debt restructuring would not affect the day-to-day operations of any of its companies, including Jamalco for which it is the managing partner. The aim is to improve the Hong Kong-based company’s capital structure, by slashing US$1 billion of debt.
Noble’s liabilities of US$1.5 billion are more than its assets, resulting in the group holding negative equity of US$327 million as of September 2021, a downward slide from positive equity of US$250.4 million a year earlier.
“The board has concluded that the current level of indebtedness of the Noble Holdings Group is unsustainable and is preventing the TradingCo Group from achieving its growth potential,” Noble said in a notice to shareholders.
In late August, Jamalco suffered a fire that gutted aspects of its plant. Noble estimated that it will cost some US$19 million or $3 billion in local currency, initially, just to get it back to half capacity by next June. Jamalco then expects to return to full capacity by September 2022, which requires the use of two digesters, that is, silos that process bauxite; and the rental of gas turbines to improve the power plant’s reliability.
Noble holds 51 per cent of the Jamalco with the Government of Jamaica, GOJ, holding the remaining shares.
Finance Minister Dr Nigel Clarke said on Tuesday that from the briefing provided by Noble Holdings Group to Jamaica and perusal of the public documents associated with the deleveraging transactions, the restructuring is unlikely to adversely impact the GOJ’s objectives with respect to Jamalco. The Clarendon-based alumina refinery is to be privatised via the Jamaican stock market and Jamaica is working cooperatively with Noble towards that end.
Strategic PRIORITIES
“On the contrary, we believe that there continues to be strong alignment between the GOJ and Noble Holdings Group with respect to the achievement of the Jamalco strategic priorities. Furthermore, a deleveraged Noble Holdings Group ought to be in a better position to support the achievement of these priorities” Clarke said.
The immediate strategic priorities include rebuilding the powerhouse and other facilities, restarting production, and achieving the incorporation of Jamalco in preparation for the initial public offering and listing.
Noble’s deleveraging and reorganisation should be completed in March 2022. On Monday, Noble avoided a bond interest payment, as part of agreed-to steps with 80 per cent of bondholders to deleverage its debt.
Noble operates two divisions: Trading Group, which holds the bonds; and AssetCo, which holds the assets of Jamalco and another entity called Harbour Energy. The unsustainable debt load, as described by Noble, doesn’t affect Jamalco, but affects the wider group’s ability to grow.
“For the avoidance of doubt, the transaction relates only to the Trading Group liabilities and not to the AssetCo Group under and including AssetCo, which owns a joint venture interest in Jamalco and a look-through 8.31 per cent beneficial interest in Harbour Energy PLC,” Noble said in forward-looking statements released last Friday.
Following the slashing of its debt, Noble plans to spin-off TradingCo and operate only its AssetCo unit.
“Following the reorganisation the TradingCo Group will cease to be a part of the Noble Holdings Group, enabling the Noble Holdings Group to focus on the assets and businesses operated and managed by AssetCo and its subsidiaries, to realise their full potential value for the stakeholders of the Noble Holdings Group,” the notice read.
Noble also said AssetCo held US$81 million in cash up to December 13, and “has sufficient liquidity to meet all of its current needs”.
Over nine months ending September, the group earned US$2.6 billion, compared to US$2.04 billion in 2020. It recorded a net loss of US$72.2 million over the nine-month period, an improvement relative to the US$376 million of losses the previous year.