S&P cuts Singapore's Noble Group rating again

SINGAPORE - S&P Global Ratings has lowered its long-term corporate credit rating on Noble Group to from BB- to B+ . The outlook is negative, it said.

It also lowered the long-term issue rating on Noble's outstanding senior unsecured notes from B+ to B.

"We downgraded Noble to reflect our view that the company's liquidity position has weakened despite the recent completion of refinancing and a proposed US$500 million (S$677 million) fully underwritten rights issue," S&P Global Ratings credit analyst Danny Huang said in a press statement on Wednesday (June 15).

"This is the result of shorter tenors and higher funding cost, in our view, which reflects banks' more negative stance toward the company. We have revised our liquidity assessment of Noble to less than adequate from adequate."

Noble obtained a US$1 billion committed revolving loan facility (RCF) and a mostly committed US$2 billion revolving borrowing base facility (BBF) in May 2016.

Compared with the company's previously obtained three-year RCF, the recent facilities have a maturity of 364 days.

" In our view, Noble will need to refinance the borrowings within the next 12 months, and continued commitment from banks will depend on the successful execution of the company's business rationalisation," the ratings agency said.

A sustained weak operating performance and increased working capital requirement will further constrain Noble's liquidity, it added.

The company reported weak results for the first quarter of 2016 and had an outflow of US$486 million in cash flow from operations, primarily driven by a decline in trade and other payables.

"We believe this is due to lower bank credit lines to finance operations and working capital. Noble's gain on fair value of mark-to-market contracts declined by US$560 million between Dec. 31, 2015, to March 31, 2016, and it is unclear to us whether a further decline may happen," it said.