Singapore: Noble Group credit rating downgraded to junk by Moody’s as commodity rout deepens

Moody’s Investors Service downgraded its credit rating on Noble Group Ltd on Tuesday to junk status with a negative outlook due to concerns over the Singapore-listed commodity trader’s liquidity, profitability and cash flow.

In a blow to the company’s efforts to retain its investment grade rating and slash debt by selling assets, Moody’s cut Noble‘s senior unsecured bond ratings to Ba1, which represents junk status, from Baa3 and assigned a Ba1 corporate family rating to Noble.

The company was put on review for possible downgrade in mid-November, Moody’s said in a statement.

The worsening year-long rout in commodities, which has punished prices of raw materials that Noble handles from oil to copper, has overshadowed cost-cutting plans and will likely hurt access to funding and challenge its profitability, it said.

“The downgrade of Noble‘s ratings reflects Moody’s concerns over the company’s liquidity,” Joe Morrison, a Moody’s vice president and senior credit officer, said in the statement.

The ratings reflect low levels of profitability and consistent negative free cash flow from core operating activities, which exclude proceeds from asset sales.

“The downgrade also reflects the uncertainty as to whether or not these factors can be improved sustainably and materially, given our expectations of a prolonged commodity downcycle, and the consequent negative sentiment impacting Noble and commodity traders in general,” Morrison said.

A week ago Noble sold its remaining stake in its agricultural trading business for $750 million in cash as it seeks to cut debt, shore up its balance sheet and hold onto its investment grade credit rating.

On Tuesday, Noble said it still believed the agricultural sale would put its financial metrics in excess of those required of an investment grade credit. Debt stood at $4.2 billion at end-September.

“It is unfortunate that this transaction has seemingly, in our view, been outweighed by Moody’s negative view of the commodity producer segment,” Noble said.

Shares in Noble have shed around two-thirds of their value since mid-February when blogger Iceberg Research alleged the company was inflating its assets by billions of dollars by not fairly representing the value of its commodity contracts.

Noble rejected the claims and board-appointed consultant PricewaterhouseCoopers found no wrongdoing in a report published in August.

It has investment grade ratings with the other two major agencies, Standard & Poor’s and Fitch.

Also Read:

Noble Group exits agribusiness with unit sale to China’s COFCO

Noble Group’s oil trading generates positive cash flow after commodity rout

Singapore: Senior M&A executive at Noble Group quits

Reuters

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.