Updated: Noble Group dealt fresh blow as Fitch cuts its ratings yet again

[SINGAPORE] Noble Group Ltd received a fresh blow as Fitch Ratings Ltd. cut the embattled commodity trader's rating for a second time in the space of 10 days, flagging concern over its ability to address about US$2 billion of debt that matures over the next 12 months.

The Hong Kong-based company is in talks with banks to renew a borrowing base facility that expires next month, and Fitch said a successful rollover of a large part of this is "critical" for its liquidity. Fitch expects the banks will do so, but on less favourable terms, according to a statement late on Thursday.

The cut from Fitch came as Morgan Stanley emerged as a major shareholder in Noble Group, with a stake of 7.95 per cent, according to three statements to the Singapore exchange, the last of which cited an aggregation of global positions.

The bank owns the stake at the same time that it's been mandated by Noble Group to review its strategic alternatives, along with Moelis & Co.

The crisis at Noble Group, which stretches back more than two years, has intensified this week amid rising investor concern about the company's ability to revive its business and meet debt obligations. The firm's shares and bonds have plunged after S&P Global Ratings flagged the risk of a default within a year.

Muddy Waters LLC founder Carson Block has predicted that Noble Group will almost certainly have to undergo a restructuring.

"The downgrade and rating watch negative reflect the need for Noble to address debt maturities of US$2 billion to US$2.1 billion over the next 12 months," Fitch said, cutting its score on the company and its unsecured notes by three notches to B- from BB-.

"The continuous negative news about the company and resultant weak sentiment is likely to make refinancing negotiations more difficult than we expected."

The B- rating at Fitch is six steps below investment grade. Both S&P's score at CCC+ and Moody's Investors Service at Caa1 are seven steps below that level.

Noble Group's shares have lost more than 70 per cent this year, with the dive deepening this month after a first-quarter loss, and ratings cuts by S&P, Moody's and Fitch, which had reduced its assessment on May 16. The Singapore-listed shares traded 2.4 per cent higher at 43 Singapore cents at 11:43am, valuing the company at S$565 million.

"It's unusual for a rating agency to cut a company twice in such a short space of time and by that many notches," said Annisa Lee, the Hong Kong-based head of Asia ex-Japan flow credit analysis at Nomura International (Hong Kong) Ltd. "I don't see this happening very often."

Multiple-notch rating changes do occur "when exceptional circumstances warrant it," Fitch said in an emailed statement on Friday, citing the challenges faced by Noble Group, including the debt maturities coming due, as well as negative news and weak sentiment.

The maturities Noble Group faces between next month and May 2018 comprise US$600 million of secured debt, a US$1.1 billion unsecured term loan and US$380 million of senior notes, according to Fitch.

The agency noted the "strength of Noble's balance sheet, with a high working capital/total debt ratio, low portion of secured debt and significant amount of assets available to pledge."

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