Noble Group may lose Moody's investment-grade rank on liquidity issue

Noble Group may lose its investment-grade credit rating if its liquidity position doesn't improve, said Moody's on Tuesday, Oct 20, 2015.
Noble Group may lose its investment-grade credit rating if its liquidity position doesn't improve, said Moody's on Tuesday, Oct 20, 2015. PHOTO: REUTERS

SINGAPORE (Bloomberg) - Noble Group, the commodity trader battling criticism of its accounting, may lose its investment-grade credit rating if its liquidity position doesn't improve in the next one to two quarters, according to Moody's Investors Service.

While yesterday's move to secured lending won't immediately effect the credit rating, it could also be downgraded if its leverage continues to rise, Moody's said in an e-mailed statement on Tuesday.

Noble's increased its senior secured revolving trade credit facility to US$1.1 billion from US$450 million. Moody's rates Noble at Baa3, the lowest investment grade.

"Drawings under the facility will increase liquidity and availability under Noble's committed bank facilities in the short term," Moody's said.

"However, upsize of the secured credit facility will limit the financial flexibility of Noble and raise the risk of subordination for the company's senior unsecured creditors, which are credit negative."

Noble shares have slumped 55 per cent this year amid criticism from a group calling itself Iceberg Research and investor concern that slumping raw material prices would hurt its business.

The Singapore-listed commodity trader said on Monday funds from its credit facility would be used by units Noble Americas Corp and Noble Petro for working capital and trade finance.

Noble is rated BBB- at Standard & Poor's, also the lowest investment grade.

Noble shares jumped 2 per cent on Tuesday to close at 51.5 Singapore cents.

While the shares have rallied the most on the benchmark Straits Times Index this month, they remain the worst performing index member this year.