By Umesh Desai and Aradhana Aravindan
HONG KONG/SINGAPORE (Reuters) - A four-month credit extension for cash-strapped Noble Group Ltd sent the commodity trader's shares up almost 50 percent on Monday, though traders, analysts and industry sources warned the reprieve was likely to be only temporary.
The Singapore-listed firm on Friday persuaded banks to extend a $2 billion credit line, due to be rolled over by the end of this week, but it was asked to find a strategic investor, a person familiar with the matter told Reuters.
Noble, which has been seeking a cash injection for months, declined to comment on the credit line.
"Any roll over is significant, purely because it allows this company to function for another four months," said trading strategist Nicholas Teo at KGI Securities Singapore.
"It doesn't mean (Noble) is completely clear."
Noble's decimated stock soared, closing up 46 percent at just under S$0.48. While this is the biggest percentage gain in 18 years, the value of the stock is still only a fraction of its 2011 peak price of about S$17 ($12.30).
At its height, Hong Kong-based Noble was Asia's largest commodity trader, a powerhouse in coal and oil to rival larger European players like Glencore.
Questions over its accounting and the sharp downturn in commodity markets since 2012, however, have left the company struggling to meet its debt obligations, and forced to dramatically reduce the scale of its operations.
Scrambling to secure its short-term future beyond its debt, Noble has also sought to do more to retain its key asset - the people who account for the bulk of its revenue - turning to cash payments for those who agree to stay for the next six months.
The company has in recent days converted 2016 cash-and-share bonuses into all-cash payouts for experienced traders and analysts who commit to remaining in place until the start of December, company sources told Reuters.
"Noble has now approached me and my desk colleagues and offered to convert the bonus into a full cash payment. In return, I committed to stay until at least December 1," one senior trading source said on condition of anonymity, as he is not permitted to discuss his contract.
Noble did not comment on the payments.
Trust is key in commodities trading, and Noble's ability to trade depends almost entirely on having enough trust in the market for counterparties to engage with it in multi-million dollar deals that can take months to execute and pay out.
In the physical market, especially coal where Noble remains a major global supplier, traders within Noble and also with several of its counterparties said that Noble was working.
But in derivatives, credit lines are key and industry sources said Noble was having a tougher time.
"Unless they solve their credit situation without term limits (like the current four months), I can't engage with them in new deals," said one source with a competitor.
Noble, which has stood by its accounts, surprised investors this year with a first-quarter loss, prompting credit-rating firms to fret.
Noble bonds due in 2022 traded half a point lower at 37/39 cents on the dollar on Monday, while its credit default swaps continued to imply a high default probability of 94 percent.
"First, it is only four months and gives the company limited breathing room," said Todd Schubert, head of fixed income research at Bank of Singapore. "Also, we do not know either the pricing/terms of the extension."
Noble's refinancing schedule was a top concern in the market, reflected in its perpetual bonds trading at 15/17 cents on the dollar.
Coupon payments on the perpetual bonds are due later this month. Noble can defer payments without triggering a default under the bonds' terms, though the market would take a dim view. Coupon payments on other bonds are due in July and September.
"What little hope remains is based on some form of white knight investor coupled with asset sales," said Rick Mattila, strategy head at MUFG Securities Asia.
"But clearly market pricing of bonds implies an expectation of default and restructuring at this point."
($1 = 1.3824 Singapore dollars)
(Reporting by Umesh Desai in HONG KONG, Aradhana Aravindan and Henning Gloystein in SINGAPORE, additional reporting by Miyoung Kim; Editing by Edwina Gibbs, Christopher Cushing and Himani Sarkar)