LONDON (REUTERS) - Ratings agencies S&P and Moody's cut their credit ratings on commodities trader Noble Group on Monday (Aug 14), citing high default risks.
Once Asia's largest commodities trading house, Noble is slimming down to its core Asian coal trading business after a two-year crisis. Last month it announced the sale of its US gas and power business and began the sale of its oil liquids unit.
"We see an increased risk that Noble may not be able to meet its debt obligations in the next six months, especially if the company is not able to turnaround or if it breaches its financial covenants and fails to get a waiver from banks," S&P said.
Last week, Noble reported a second-quarter loss of US$1.75 billion (S$2.37 billion), weeks after warning it faced its steepest quarterly loss in a year and a half and would slash jobs and sell assets to cut debt.
S&P said it had cut Noble's long-term corporate credit rating to CCC- from CCC+ meaning it heightened default risks from substantial to imminent.
Moody's also cut Noble's corporate family rating and senior unsecured bond ratings to Caa3 from Caa1, reflecting a similar reading of risks surrounding the trading house.
"The downgrade reflects significant default risk for Noble within the next several quarters, given its operating cash burn, declining cash levels and large debt maturities. Moreover, should it default, we believe the prospect of a full recovery of principal and interest will be low for unsecured bondholders," Gloria Tsuen, Moody's Vice President and Senior Analyst, said.
Noble's liquidity headroom - including readily available cash and unutilized committed facilities - fell to US$1.4 billion at end-June 2017 from US$2.4 billion at end-March 2017. This is insufficient to cover the company's US$2.6 billion in bank debt and bonds due in the next 12 months, Moody's said.
S&P said Noble's cash on hand and the potential proceeds from the sale of Noble Americas Gas & Power Corp will not be enough to cover the company's revolving credit facilities.