Noble climbs even as Moody's flags US$900m funding gap

[SINGAPORE] After a savage three-day sell-off, Noble Group Ltd shares climbed on Tuesday even as Moody's Investors Service joined S&P Global Ratings in highlighting the embattled commodity trader's finances, saying that estimated liquidity isn't sufficient to cover debt due by mid-2018.

Moody's said that while the liquidity headroom, including cash and unused committed facilities, was US$2.4 billion at end of the first quarter, it's since dropped.

"After paying down US$650 million in bank debt and the maturity of a revolving credit facility in early May 2017, the headroom would have narrowed to US$1.2 billion and become insufficient to cover the US$2.1 billion in debt due," it said in a statement as it cut Noble Group's rating further into junk territory.

The Hong Kong-based trader is facing mounting difficulties after reporting a quarterly loss of almost US$130 million last week and saying it won't return to profitability until at least 2018-2019. The company has faced years of setbacks, marked by losses, asset sales, and credit-rating downgrades, and has directed new Chairman Paul Brough to review its strategic options. S&P Global Ratings said last week that the Singapore-listed company's debt-load is unsustainable given its current earnings path.

'Heightened Concern'

In the late Monday statement, Moody's cut its rating on Noble Group to Caa1 from B2 and said the outlook remained negative, with no return to profitability expected this year.

"The downgrade reflects heightened concern over Noble's liquidity stemming from its weak operating cash flow and large debt maturities," said Gloria Tsuen, a Moody's vice-president and analyst.

On Tuesday, the former blue-chip stock initially lost as much as 5.1 per cent to 56 Singapore cents, then rebounded to trade 5.1 per cent higher at 62 cents at 1:48pm. The climb follows the three-day, 54 per cent stock slump that was accompanied by a rout in the company's bonds.

Noble Group told investors Brough's first job after taking over from founder Richard Elman will be to undertake the review, which will include exploring "strategic alternatives", an indication that Noble Group might be open to finding a buyer.

"At the moment, all I'm concerned with is conducting the strategic review," Mr Brough told Bloomberg on Sunday.

During last week's results presentation, Chief Financial Officer Paul Jackaman said the "liquidity headroom has remained pretty healthy," noting the sale of US$750 million five-year bonds in March. At the end of that month, Noble Group's net debt to capital was 46 per cent, in line with the group's stated target range of 45 per cent to 50 per cent, Mr Jackaman said, according to a transcript.

On Tuesday, Singapore Exchange Ltd said that it's tracking the company.

"SGX is closely monitoring developments at Noble Group," June Sim, head of listing compliance, Singapore Exchange Regulation, said in an email in response to Bloomberg queries.

"However, we do not discuss our dealings with companies nor comment on company specifics."

BLOOMBERG