Noble's rating downgraded to junk, company's shares tumble

PHOTO: Reuters

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 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 also 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. "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.