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Noble Group pushes back after Moody's two-step rating downgrade
[SINGAPORE] Noble Group Ltd pushed back after a two-level downgrade by Moody's Investors Service, with the commodity trader saying a planned sale of a US energy unit was progressing well and efforts to cut costs and debt were making headway. Bond prices fell, while shares rose.
"We remain on track to reposition the company as an asset-light supply chain manager with high-returning businesses," spokesman Stephen Brown said on Tuesday after the Moody's announcement the day before.
"Efforts to improve liquidity and further deleverage continue through the completed US$500 million rights issue, the well-progressed sale of Noble Americas Energy Solutions and other capital initiatives and cost-cutting measures."
In a tumultuous 18 months, Noble Group has lost its blue-chip status and investment-grade rating amid sliding commodity prices, attacks on its accounting and losses.
Former chief executive officer Yusuf Alireza quit in May and days later the company announced the emergency rights issue. Moody's move contrasted with an assessment from Fitch Ratings Ltd hours before that Noble's liquidity crunch may be temporary.
"Given the company's limited ability to generate positive operating cash flow and the large debt maturities in the second quarter of 2017, the company's liquidity could come under further pressure over the next 12 months, despite the US$500 million in proceeds from its equity rights offering," said Moody's senior credit officer Joe Morrison.
Moody's downgrade to B2 brings the rating five steps below investment grade. That compares with the BB+ rating by Fitch, which is one notch under investment level.
Fitch said Monday Noble will probably generate US$900 million in the coming months, including from the rights issue. The fund-raising was supported by shareholders, including China's sovereign wealth fund.
Noble Group's 2020 notes fell for a second day, losing 1.7 US cents to 77.3 US cents on the dollar for a yield of 15.5 per cent as of 3 pm in Hong Kong, according to Bloomberg-compiled prices. The Singapore-listed shares, which fell to the lowest since 2003 this month before the rights shares began trading, were 4.9 per cent higher.
Noble has lost more than half its market value over the past year as prices of everything from oil to coal and copper tumbled and its accounting methods came under attack from critics including Iceberg Research.
As the company sells parts of its business and shuts down others, it has shrunk from a US$10.2 billion trading behemoth in 2010 to a shadow of its former self, with a current market value of US$1.4 billion.
Hong Kong-based Noble last week reported a second-quarter loss, an increase in net debt and drop in its liquidity headroom. The company got a waiver from banks relating to one of the covenants in its revolving-credit facility and borrowing-base facility for the period to June 30, it said.
Chief financial officer Paul Jackaman told Bloomberg last week after the results that credit lines linked to particular commodities are "constrained".