Noble shares claw back some ground as Moody's highlights debt, SGX watching developments

A Noble Group sign is seen at a meet-the-investors event in Singapore, on Aug 17, 2015.
A Noble Group sign is seen at a meet-the-investors event in Singapore, on Aug 17, 2015. PHOTO: REUTERS

SINGAPORE (BLOOMBERG) - Noble Group shares steadied even after Moody's Investors Service joined S&P Global Ratings in highlighting the embattled commodity trader's funding position, saying its estimated liquidity isn't sufficient to cover the debt that will fall due by mid-2018.

Moody's said while the company's so-called liquidity headroom, including cash and unutilized committed facilities, was US$2.4 billion at end of the first quarter, it has since dropped.

"After paying down US$650 million in bank debt and the maturity of a revolving credit facility in early May 2017, the headroom would have narrowed to US$1.2 billion and become insufficient to cover the US$2.1 billion in debt due for the rest of 2017 and first half of 2018," the agency said in a statement late on Monday as it downgraded Noble Group's rating.

The Hong Kong-based trader is facing mounting difficulties after reporting a quarterly loss of almost US$130 million last week and saying it won't return to profitability until at least 2018-2019. The company has faced years of setbacks, marked by losses, asset sales, and credit-rating downgrades, and has directed new chairman Paul Brough to review its strategic options. S&P Global Ratings said last week that Noble's debt-load is unsustainable given its current earnings path.

In the statement, Moody's cut its rating on Noble to Caa1 from B2 and said the outlook remained negative, with no return to profitability expected this year.

"The downgrade reflects heightened concern over Noble's liquidity stemming from its weak operating cash flow and large debt maturities over the next 12 months," said Gloria Tsuen, a Moody's vice president and analyst.

On Tuesday, the former blue-chip stock initially lost as much as 5.1 per cent to 56 Singapore cents, then rebounded to trade 7.6 per cent higher at 603.5 cents as of 11:11am. The climb follows a three-day 54 per cent slump in the shares that's been accompanied by a rout in the company's bonds.

On Tuesday, Singapore Exchange said that it's tracking Noble.

"SGX is closely monitoring developments at Noble Group," June Sim, head of listing compliance, Singapore Exchange Regulation, said in an email in response to Bloomberg queries. "However, we do not discuss our dealings with companies nor comment on company specifics."

Noble told investors Brough's first job after taking over from founder Richard Elman will be to undertake the review. The company also said he will also "explore strategic alternatives," often corporate-speak for finding a buyer.

"At the moment, all I'm concerned with is conducting the strategic review," Brough told Bloomberg on Sunday.

During last week's results presentation, chief financial officer Paul Jackaman said the "liquidity headroom has remained pretty healthy," noting the sale of US$750 million five-year bonds in March. At the end of that month, Noble's net debt to capital was 46 per cent, in line with the group's stated target range of 45 per cent to 50 per cent, Jackaman said, according to a transcript.