After a savage three-day sell-off, Noble Group shares climbed yesterday even as Moody's Investors Service joined S&P Global Ratings in highlighting the embattled commodity trader's finances, saying that estimated liquidity is not sufficient to cover debt due by the middle of next year.
Moody's said that while the liquidity headroom, including cash and unused committed facilities, was US$2.4 billion (S$3.4 billion) at the 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," it said in a statement, as it cut Noble Group's rating further into junk territory.
The Hong Kong-based trader is facing mounting difficulties after reporting a quarterly loss of almost US$130 million last week and saying it will not return to profitability until at least 2018 to 2019. The firm 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 the mainboard-listed company's debt load is unsustainable, given its current earnings path.
In Monday's statement, Moody's cut its rating on Noble Group to Caa1 from B2. It 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," said Moody's vice-president and analyst Gloria Tsuen.
Yesterday, the former blue-chip stock initially lost as much as 5.1 per cent to 56 Singapore cents, then rebounded to trade 5.1 per cent higher at 62 cents at 1.48pm. The climb follows the three-day, 54 per cent stock slump that was accompanied by a rout in the company's bonds. The stock ended the day at 66 Singapore cents.
Noble Group told investors that Mr Brough's first job after taking over from founder Richard Elman will be to undertake the review, which will include exploring "strategic alternatives", an indication that Noble Group might be open to finding a buyer.
"At the moment, all I'm concerned with is conducting the strategic review," Mr 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 Group'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, Mr Jackaman said, according to a transcript.
Yesterday, Singapore Exchange said that it is tracking the company. "SGX is closely monitoring developments at Noble Group," said head of listing compliance, Singapore Exchange Regulation, June Sim. "However, we do not discuss our dealings with companies nor comment on company specifics."