[SINGAPORE] Noble Group Ltd said that it will be able to meet targets from Moody's Investors Service after the agency placed the company's ratings under review for a downgrade, raising the possibility that the commodity trader may be cut to junk. The stock gained.
"We have always achieved our investment-grade rating targets," spokesman Stephen Brown said in an e-mailed response to questions on Tuesday, citing the company's quarterly results last week, including a return to positive cash flow. "We remain confident of achieving Moody's targets." The potential loss of investment-grade status would complicate Noble's drive to restore investor confidence that's been battered by criticism of its accounting, slumping raw- material prices and a tanking share price. Last week, Noble reported an 84 per cent drop in quarterly profit and said it was looking to raise about $500 million through asset sales or from a strategic investor. Moody's said the results showed the company's liquidity is still under pressure.
"The rating review is triggered by Noble's weaker-than- expected liquidity profile and its still-high leverage," Joe Morrison, vice president and senior credit officer, said in a statement on Monday after the close of trade. The review over the next two to three months will focus on Noble's ability to improve its liquidity headroom and cash flow generation, raise capital and reduce leverage, Moody's said.
Noble shares rose on Tuesday, snapping five days of losses. The stock gained 2.3 per cent to 44.5 Singapore cents at 9:28 a.m. local time. It remains this year's worst performer on the Straits Times Index after losing 61 per cent.
At present, Moody's rates Noble at Baa3, the lowest investment grade. A cut to below that level can raise a company's funding costs. Moody's said that the negative industry environment may continue to have an adverse effect on Noble's liquidity and operations. Chief Executive Officer Yusuf Alireza said in August that while Noble will do what's required to support the investment grade, it's not required for the business. Last week, Alireza told analysts the impact of a potential downgrade would be insignificant.
"We have stress tests what it would mean, and the result is insignificant in terms of additional margin call, somewhere in the order of US$100 million to US$200 million," the CEO said on Nov 12 "So it's not really relevant."