Fitch affirms Noble's ratings but sounds note of caution

Singapore

FITCH Ratings has affirmed Noble Group's investment-grade ratings after rival agencies cut the commodity trader to junk, while warning that any sign of deterioration in the company's ability to access unsecured bank funding could put that assessment in jeopardy.

The company's long-term foreign-currency issuer-default rating and senior unsecured rating were both affirmed at BBB-, Fitch said on Thursday. That's the lowest investment-grade rating. The outlook on the Hong Kong-based company's issuer-default rating is stable, Fitch said.

Noble shares have extended losses in 2016 after Standard & Poor's joined Moody's Investors Service in cutting its rating below investment grade even after the company agreed to sell the rest of its agricultural unit for at least US$750 million to bolster its finances.

For Fitch, the affirmations of the ratings were driven by Noble's improved balance sheet after the agri-stake sale, as well as its commitment to cut working capital for the metals business and continued cash-flow generation.

"The affirmations are based on Noble's ability to maintain adequate access to unsecured, committed bank facilities," Fitch said. "Any signs of deterioration of the company's ability to access unsecured bank funding could result in negative ratings action."

Fitch's assessment didn't help the shares on Thursday amid a regionwide sell-off. The stock dived as much as 6.2 per cent to 30.5 Singapore cents, matching the lowest intraday price in seven years. This year, Noble's shares have lost about 23 per cent, the second-worst performer on the Straits Times Index.

Noble's one-year credit-default swaps, which act as insurance if the company fails to pay its debt, hit a record 2,600.2 basis points on Wednesday, according to CMA prices. Its bond risk was the highest in Asia, according to data provider CMA.

The company's "near-term debt maturity is small - US$360 million of notes due in the first half of 2016", Fitch said. "This can be comfortably covered by Noble's existing liquidity, including unrestricted cash and cash equivalents and undrawn committed bank facilities." BLOOMBERG