Noble shortlists bidders for $1bn oil business

Commodity merchants Vitol and Mercuria are on the shortlist to buy Noble Group’s $1bn Americas-focused oil business as the debt-laden trading company scrambles to pay down debt to avoid bankruptcy.
Noble has asked the shortlisted bidders to submit formal offers before the end of the month when it hopes to announce a deal for the oil unit, according to people with knowledge of the process.
One person familiar with the shortlist said that US fuel retailer Pilot Flying J was also in the running for the business, which is expected to fetch about $1bn including inventories.
Noble’s oil business traded as many as 2.2m barrels a day in 2017, and so has the potential to almost double Geneva-based Mercuria’s oil volumes or boost Vitol — the world’s largest independent energy trader — above 9m b/d.
The Singapore-listed company put the oil business up for sale in July as part of a shrink-to-survive strategy as it slumped to a first-half loss of $1.9bn.
Noble also announced the sale of its US gas and power business to Mercuria for $261m at the time.
Once Asia’s biggest commodity trader, the Singapore-listed company is fighting for survival because of a crisis of confidence triggered by concerns about its accounting.
The company has been under the spotlight since 2015 when a former employee launched a series of scathing reports under the name of Iceberg Research that highlighted the company’s struggle to fully convert profits booked on long-term deals into cash.
Noble has always stood by its accounts.
But investors and trading counterparties have become nervous about the company’s ability to manage its debt load and turn round the business.
The trader has to repay $1.5bn of bonds and banks loans by May 2018.  Noble, Vitol and Mercuria declined to comment.
A spokeswoman for Pilot Flying J said the company did not “have any acquisition news to share at this time”.
Private equity group Carlyle has also shown interest but has dropped out of the process, according to one person familiar with the bidding.
Run by co-chief executive Jeff Frase, who has led oil trading at JPMorgan and Goldman Sachs, Noble’s oil unit was once the fastest-growing part of the company.
Volumes at Noble’s oil business have declined in the last two years as the trading house’s access to credit — the lifeblood of commodity dealing — has shrunk as concerns about its future have mounted.
It has a prime position on Colonial Pipeline, the conduit for petrol and diesel from the refining hub on the US Gulf Coast to the east, and a contract to sell refined fuel to Ecuador as well as leases storage facilities servicing North and South America.
The unit also owns an ethanol plant in South Bend, Indiana, and a wholesale business called Noble Petro, which distributes refined petroleum products such as gasoline and diesel in Texas, the Gulf coast and mid-continent.
Some analysts have warned that Noble may struggle to sell the oil business as a whole, and so may sell its assets individually.
For example, Pilot Flying J would be a logical buyer of Noble Petro. The company gained breathing space to restructure its debts on Thursday when its lenders extended the repayment deadline on a key credit facility until the middle of January.
At a meeting last week to approve the sale of the US gas and power business, Noble chairman Paul Brough told shareholders that he expected to complete a deal for its oil business by the end of the month.
“We have been through the first round bids.
We have fully tested the market and we are now into the second round with a smaller number of bidders and we expect to make some kind of announcement or deal before the end of September,” he said.
Noble wants to return to its roots in Asia and trading hard commodities such as coal.