Commodity trader Noble Group's default risk rose the most in Asia this year, as a deepening resources slump threatens to worsen the imbalance between the company's cash flows and liabilities.
The cost to protect the company's notes against non-payment for one year is 2,593 basis points, the highest in Asia, according to data provider CMA.
The company is preparing to refinance US$2.1 billion (S$3.02 billion) of loans due in April and May.
Noble reported short-term debt of US$3 billion on Sept 30 and US$1.9 billion of unused committed bank facilities plus cash and equivalents.
The climb in credit-default swaps came after Standard and Poor's and Moody's Investors Service cut Noble's rating to junk in the past month, citing liquidity issues, while Fitch Ratings affirmed its score at the lowest investment-grade ranking on Thursday as asset sales improved finances.
Noble said it has been successful in raising cash and still has support from its creditors.
Mr Joe Morrison, an analyst at Moody's in Hong Kong, said: "They still have a liquidity issue that they've got to manage, which is dealing with the banks to refinance loans due in May at a time when the industry environment is not favourable."
He added: "The rating committee felt that selling assets to deal with a liquidity issue was not consistent with an investment-grade profile and that the company still has some challenges going forward."
Noble agreed last month to sell the remaining 49 per cent of its agricultural unit to China's Cofco Corporation for at least US$750 million to reduce debt. Cofco already owned the other 51 per cent.
Noble spokesman Stephen Brown said in an e-mail: "Banks have their own rating metrics, and none of our bank facilities have ratings triggers."
He added: "We have successfully raised US$2.1 billion since last October. More than half of that capital is from the banks, which is a demonstration of strong support from the lenders that we still continue to enjoy.
"In addition, with the fall of commodity prices, working capital requirements and hence funding needs have decreased."
Mr Ray Choy, head of fixed income and currency research at RHB Research Institute in Kuala Lumpur, said: "Noble's stretched gearing and cash flows have been exacerbated by the rapidly deteriorating commodities price outlook.
"The default probability has risen now that the commodity cycle could have turned secularly worse."
In a results call with investors on Nov 12, chief executive officer Yusuf Alireza said that net profit was dragged down by a US$69 million operational loss on its metals and mining business.
Mr Morrison said: "It's inherently a thin-margin business.
"When you've got a deteriorating industry environment and liquidity declining and you've got thin margins and you've got negative free cash flow from your core operation, there's going to be pressure on the ratings."