Noble ratings cut yet again as debt maturities loom, shares down 75% this year

SINGAPORE — Noble Group received a fresh blow after Fitch Ratings late on Thursday (May 25) cut the embattled commodity trader’s rating for a second time in the space of 10 days, flagging concern over its ability to address more than US$2 billion (S$2.8 billion) of debt that will mature over the next 12 months.

Noble shares have lost 75.3 per cent this year, with the dive deepening this month after a US$129.4 million first-quarter loss, and ratings cuts by Standard and Poor’s, Moody’s Investors Service as well as Fitch, which last downgraded its assessment on May 16. The Singapore-listed shares ended flat at 42 cents on Friday (May 26), valuing the company at about S$551 million.

“The downgrade and rating watch negative reflect the need for Noble to address debt maturities of US$2 billion to US$2.1 billion over the next 12 months,” Fitch said, cutting its rating on the company and its unsecured notes by three notches to B- from BB-. “The continuous negative news about the company and resultant weak sentiment is likely to make refinancing negotiations more difficult than we expected,” it said.

“It’s unusual for a rating agency to cut a company twice in such a short space of time and by that many notches. I don’t see this happening very often,” said Ms Annisa Lee, the Hong Kong-based head of Asia ex-Japan flow credit analysis at Nomura International. Multiple-notch rating changes do occur “when exceptional circumstances warrant it,” Fitch said on Friday (May 26), citing the challenges faced by Noble, including the debt maturities coming due, as well as negative news and weak sentiment.

The B- rating at Fitch is six steps below investment grade. Both S&P’s score at CCC+ and Moody’s at Caa1 are seven steps below investment grade.

Hong Kong-based Noble is in talks with banks to renew a borrowing base facility expiring next month. Fitch said a successful rollover of a large part of that is “critical” for its liquidity. The ratings agency said it expected the banks will do so, but on less favourable terms.

The maturities Noble faces between next month and May next year comprise US$600 million of secured debt, a US$1.1 billion unsecured term loan and US$380 million of senior notes, according to Fitch. The agency noted the “strength of Noble’s balance sheet, with a high working capital/total debt ratio, low portion of secured debt and significant amount of assets available to pledge.”

The ratings cut from Fitch came as financial services giant Morgan Stanley emerged as a major shareholder, with a stake of nearly 8 per cent, according to statements filed with the Singapore Exchange. Morgan Stanley owns the stake, which is deemed rather than direct, at the same time that it’s been mandated by Noble to help review its strategic alternatives. Morgan Stanley couldn’t be reached for comment.

The crisis at Noble, which declined to comment on Fitch’s ratings cut or the Morgan Stanley stake, has intensified this week amid rising investor concern about the company’s ability to revive its business and meet debt obligations. The firm’s shares and bonds plunged after S&P on Monday flagged the risk of a default within a year. Mr Carson Block, the founder of US short seller Muddy Waters, predicted on Thursday that Noble will almost certainly have to undergo a restructuring. BLOOMBERG