SINGAPORE (BLOOMBERG, REUTERS) - Noble Group's crisis deepened after S&P Global Ratings flagged a risk of default for the commodity trader within a year, triggering a rout in the company's shares before they were suspended in Singapore ahead of a company statement. The 2020 bonds fell to a record low.
"Noble is fighting for its life now," said Owen Gallimore, head of credit strategy at Australia & New Zealand Banking Group, who's been covering Noble Group since 2008 and has been underweight on the bonds since 2015. "We're not sure how long it can sustain without a white knight."
Noble Group declined to comment on S&P's assessment in response to a request from Bloomberg News.
The Hong-Kong based trader's troubles are deepening after two turbulent years that have been marked by losses, asset sales, and accusations of improper accounting that it has denied. Since surprising investors two weeks ago with a quarterly loss, the shares have tumbled to multiyear lows and the price of its bonds has fallen by more than half. S&P's warning follows downgrades from Moody's Investors Service and Fitch Ratings in recent days.
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Citing sources, Reuters also reported on Monday that China's state-owned Sinochem is no longer pursuing an investment in Noble due to concerns over its finances and business outlook.
The setbacks come at a time when Noble is negotiating a crucial rollover of a US$2 billion (S$2.77 billion) credit facility secured on its inventories and working capital.
Lorraine Tan, director of equity research in Asia at Morningstar, said Noble faced a big refinancing challenge. "Their survivability depends on their ability to refinance the borrowing base facility," she said and placed her coverage of Noble under review, pending news. "There is a question mark again on how much more they would have to pay in the refinancing," Ms Tan said.
Noble asked for a trading halt after its shares dropped as much as 32 per cent in heavy volume to 40 Singapore cents, the lowest since 2001, in the first 36 minutes of trading on Tuesday. Noble is due to issue a statement after the Singapore exchange queried the company.
Its bonds due 2022 fell to a price of 39.33 cents on the dollar from 42.84 cents, and down some 58 points since early May when Noble first warned of the quarterly loss and also flagged losses for the next two years.
Noble has struggled ever since Iceberg Research questioned its accounts in early 2015 and following a brutal downturn in commodity markets. The company has stood by its accounts. The combined impact has been a collapse of its share price, credit downgrades, management upheavals and a series of writedowns, asset sales and fundraising. Noble's market value has shrunk to about US$400 million now from US$6 billion in February 2015.
This month, the company also kicked off a strategic review of its businesses under new Chairman Paul Brough.