Noble Group shares fall as Fitch sees 'real possibility' of default

The reception of Noble Group is seen at its headquarters in Hong Kong.
The reception of Noble Group is seen at its headquarters in Hong Kong.PHOTO: REUTERS

HONG KONG (BLOOMBERG) - Noble Group shares slid on Tuesday (June 27) on the first day of trading after Fitch Ratings cut the embattled commodities trader's credit rating to a score indicating that a default is possible.

The company's stock dropped 3.8 per cent as of 12:02pm in Singapore after a public holiday on Monday. It earlier in the morning fell as much as 7.6 per cent.

Fitch slashed its rating late on Friday by two steps to CCC, its third downgrade since the middle of last month. Fitch's definition for that rating says it indicates "substantial credit risk" and that "default is a real possibility."

The moves mark a reversal following a 63 per cent surge in Noble Group's shares last week, when the company said it remains in talks with potential investors after agreeing with lenders to extend its US$2 billion credit facility for four months. The struggle to sustain the rally flags challenges for the company, in which Abu Dhabi fund Goldilocks Investment Co became a major holder last week, as it searches for a strategic investor to restore confidence following a collapse in its shares and bonds this year.

"The extension of Noble's US$2 billion borrowing base facilities by 120 days from June 20, 2017 does not provide evidence of medium-term funding stabilization," Fitch said in its statement on Friday. The uncertainty surrounding the outcome of the facility may constrain the company's flexibility in its trading operations, according to Fitch.

Noble Group didn't immediately respond to a request for comment on Tuesday on Fitch's downgrade.

The company's 6.75 per cent bonds due in 2020 were little changed Tuesday at 37.5 cents on the dollar, according to prices compiled by Bloomberg. They have fallen from 83.7 cents at the end of last year.

"We recognize Noble's effort to sell part of the group or its assets to aid in the restructuring of its business," Fitch said. "But visibility over the form or success of any transaction is low given current market conditions."