Noble Group pushes back after Moody's downgrade

Former Noble CEO Yusuf Alireza quit in May and, days later, the firm announced an emergency rights issue.
Former Noble CEO Yusuf Alireza quit in May and, days later, the firm announced an emergency rights issue.

Planned sale of US energy unit going well, efforts to cut costs and debt making headway, says commodity trader

Noble Group has pushed back after a two-level downgrade by Moody's Investors Service, with the commodity trader saying a planned sale of a United States energy unit was progressing well and efforts to cut costs and debt were making headway.

"We remain on track to reposition the company as an asset-light supply chain manager with high-returning businesses," Noble spokesman Stephen Brown said yesterday after the Moody's announcement the day before.

In a tumultuous 18 months, Noble has lost its blue-chip status and investment-grade rating amid sliding commodity prices, attacks on its accounting as well as losses. Former chief executive officer Yusuf Alireza quit in May and days later the company announced an emergency rights issue.

The Moody's move contrasted with an assessment from Fitch Ratings hours before that Noble's liquidity crunch may be temporary.

Moody's senior credit officer Joe Morrison said: "Given the company's limited ability to generate positive operating cash flow and the large debt maturities in the second quarter of next year, its liquidity could come under further pressure over the next 12 months, despite the $500 million in proceeds from its equity rights offering."

Moody's downgrade to B2 brings Noble's rating five steps below investment grade. That compares with the BB+ rating by Fitch, which is one notch under investment level.

Fitch said on Monday that Noble will probably generate US$900 million (S$1.2 billion) in the coming months, including from the rights issue. The fund raising was supported by shareholders, including China's sovereign wealth fund.

Noble's 2020 notes fell for the second day, losing 1.7 US cents to 77.3 cents on the US dollar for a yield of 15.5 per cent as of 3pm in Hong Kong, according to Bloomberg- compiled prices. The Singapore-listed shares, which fell to their lowest since 2003 this month before the rights shares began trading, were 4.9 per cent higher.

Noble has lost more than half of its market value over the past year as the prices of everything from oil to coal to copper tumbled and its accounting methods came under attack from critics, including Iceberg Research.

As Noble 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.

The Hong Kong-based company last week reported a second-quarter loss, an increase in net debt and a drop in its liquidity headroom.

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A version of this article appeared in the print edition of The Straits Times on August 17, 2016, with the headline 'Noble Group pushes back after Moody's downgrade'. Print Edition | Subscribe