Noble says it can meet Moody's targets

Noble Group chief Yusuf Alireza has said the impact of a downgrade would be insignificant in terms of the additional margin required. Noble Group is currently rated by Moody's at Baa3, the agency's lowest investment grade, while Standard & Poor's has
Noble Group is currently rated by Moody's at Baa3, the agency's lowest investment grade, while Standard & Poor's has given the commodity firm a BBB- rating, one notch above junk.PHOTO: REUTERS
Noble Group chief Yusuf Alireza has said the impact of a downgrade would be insignificant in terms of the additional margin required. Noble Group is currently rated by Moody's at Baa3, the agency's lowest investment grade, while Standard & Poor's has
Noble Group chief Yusuf Alireza has said the impact of a downgrade would be insignificant in terms of the additional margin required.PHOTO: REUTERS

Commodity trader reacts as ratings agency places firm under review for downgrade

Noble Group said yesterday it will be able to meet targets from Moody's Investors Service after the agency placed the company's ratings under review for a downgrade, raising the possibility the commodity trader may be cut to junk status.

The stock shed 1.5 cents to 42 cents yesterday.

"We have always achieved our investment-grade rating targets," spokesman Stephen Brown said in an e-mailed response to questions, citing the company's quarterly results last week, including a return to positive cash flow.

"We remain confident of achieving Moody's targets."

The review by Moody's comes as commodity companies are grappling with slumping raw-material prices and Noble faces the additional challenge of fending off criticism of its accounting practices.

DOWNGRADE FACTORED IN

Investors could have potentially already priced in the possibility of a downgrade. Any fallout from this actual move by Moody's may not actually elicit much downside impact.

MR BERNARD AW, a strategist at IG Asia

Last week, Noble reported an 84 per cent drop in quarterly profit and said it was looking to raise about US$500 million (S$712 million) through asset sales or from a strategic investor.

Moody's said the results showed the company's liquidity is still under pressure.

"The rating review is triggered by Noble's weaker-than-expected liquidity profile and its still-high leverage," Mr Joe Morrison, vice-president and senior credit officer, said in a statement on Monday after the close of trade.

The review over the next two to three months will focus on Noble's ability to improve its liquidity headroom and cash-flow generation, raise capital and reduce leverage, Moody's said.

Noble Group shares yesterday initially gained as much as 3.5 per cent to 45 cents, then dropped to end in the red.

The stock remains this year's worst performer on the Straits Times Index after losing 62 per cent.

"Investors could have potentially already priced in the possibility of a downgrade," Mr Bernard Aw, a strategist at IG Asia in Singapore, said by phone.

"Any fallout from this actual move by Moody's may not actually elicit much downside impact."

At present, Moody's rates Noble at Baa3, the lowest investment grade, while Standard & Poor's has a BBB- rating, one notch above junk. The negative industry environment may continue to have an adverse effect on Noble's liquidity and operations, Moody's said in the statement on Monday.

The Bloomberg Commodity Index traded yesterday near the lowest since 1999.

Chief executive officer Yusuf Alireza said in August that while Noble will do what is required to support the investment grade, it is not required for the business.

Last week, Mr Alireza told analysts the impact of a potential downgrade would be insignificant in terms of the additional margin required, estimating the sum at between US$100 million and US$200 million.

The CEO has also repeatedly rejected the criticism of its accounts, while pledging to increase transparency.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 18, 2015, with the headline 'Noble says it can meet Moody's targets'. Print Edition | Subscribe