Noble Group raises $500 million from upsized placement

Noble Group last night raised S$634.6 million ($500 million) from a top-up placement that was upsized following good demand. The deal, which was only the third equity transaction of size to price in Asia since the beginning of February, came just three days after Noble posted stronger-than-expected full-year results and may well be the start of a new wave of follow-ons as companies emerge from their earnings-related blackout periods.

True, the secondary markets are volatile at the moment and there are concerns about a further escalation of the violence in Libya and its effect on oil prices, but in a way, that could act as an incentive for issuers to come to market now – in case the market environment gets worse later. Indeed, the busy start to the year in the dollar bond market is partly driven by a desire to get fundraising done before interest rates start to rise.

According to sources, Noble will use the proceeds for general corporate purposes, although the understanding is that this primarily refers to capital expenditure, including further investments and acquisitions. In December, the Singapore-listed supply chain manager and commodities trader agreed to buy two sugar mills in Brazil for $950 million (the transaction is set to close this year) and, in a conference call following Monday’s earnings release, the management indicated that it is working on a number of investments.

At the end of 2010, the company had cash on hand of about $1.6 billion, but by adding further to that it is giving itself added flexibility in how it funds future acquisitions without running the risk of a potential ratings downgrade. The latter is of particular importance to Noble as it achieved an investment-grade credit rating from both Moody’s and Standard & Poor’s as recently as 2009 and wouldn’t want to slip back into high-yield territory, which is looming just one notch below.