Noble has sufficient liquidity to cover short term commitments, says Fitch

Noble Group's logo.
Noble Group's logo. PHOTO: REUTERS

SINGAPORE - Singapore-listed commodity trader Noble Group has sufficient liquidity to cover its short term commitments in the next 12 months, Fitch Ratings said on Friday morning (Nov 20).

Along with operational improvements, this supports its rating, the credit agency said.

"However, any weakening in Noble's liquidity position could result in negative rating actions."

Fitch maintained its BBB- rating of Noble with a stable outlook.

Its statement comes after fellow credit agency Moody's said on Monday (Nov 16) that it is reviewing its rating of Noble for a potential downgrade, raising the possibility the commodity trader could be cut to junk status.

The review was triggered by Noble's weaker than expected liquidity profile and its still-high leverage in its quarterly results announcement, which came out on Thursday, Moody's said at the time.

Fitch said on Friday: "Noble's immediate liquidity need is the repayment of the US$458 million (S$647.4 million) senior notes due within the next half year, which it has the cash to do so."

"Its US$2.5 billion short-term bank debt at end-third quarter remains at an elevated level as the company attempted to reduce finance costs by switching from capital financing to bank debt financing in 2015. Fitch believes this will keep Noble's short-term debt at a higher level than the historical trend of around US$1.4 billion to US$1.6 billion prior to 2015."

Fitch also noted that Noble has liquidity headroom to cover any liquidity need arising from commodity price movements.

Noble obtained a US$1.1 billion facility in October as well, providing it with additional flexibility, it said.

"Noble's liquidity position is also mitigated by its readily marketable inventory of US$1.7 billion at end-third quarter, which can be used to repay debt if needed."

But the credit agency added that any deterioration of the company's liquidity profile, especially a further deterioration of committed undrawn facilities, is likely to result in negative ratings action.

"Fitch will closely monitor Noble's ability to improve its liquidity headroom, either through operating cash flow generation, asset disposal or capital raising in the next six to 12 months."

It added it expects Noble to continue to improve its core operations in the fourth quarter to support the reduction of its net debt level.