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Noble Group slumps as Fitch flags ‘real possibility’ of default

SINGAPORE — Noble Group shares slumped 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.

SINGAPORE — Noble Group shares slumped 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 stock dropped 4.72 per cent in Singapore after the public holiday on Monday. It earlier fell by as much as 7.6 per cent, and has seen a 70.29 per cent slump in year-to-date return, Bloomberg data showed.

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’s shares last week, when the company said it is still in talks with potential investors after agreeing with lenders to extend its US$2 billion (S$2.8 billion) credit facility for four months. The struggle to sustain the rally flags challenges for the firm, in which Abu Dhabi fund Goldilocks Investment 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 stabilisation,” Fitch said on Friday. The uncertainty surrounding the outcome of the facility may constrain the company’s flexibility in its trading operations, according to Fitch.

Fitch estimates that Noble had US$900 million of cash on its balance sheet at the end of May, and should be able to cover the US$600 million drawn under the borrowing base facility. It added that the facility also gives Noble access to letters of credit, of which US$1 billion had been drawn. “The letters of credit are key tools to provide credit enhancement to suppliers,” said Fitch, adding that reduced access would diminish Noble’s capacity to trade. BLOOMBERG

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