Noble Group Cut to Junk by Moody's Over Liquidity Concerns

  • Move comes despite sale of stake in agriculture unit to Cofco
  • Commodity trader has been criticized over its accounting

Noble Group Ltd., the commodity trader battling criticism of its accounting, had its credit rating cut to junk by Moody’s Investors Service on concerns about the company’s liquidity amid a broad downturn in prices for energy and raw materials.

Moody’s lowered Noble’s senior unsecured bonds to Ba1 from Baa3, the ratings company said Tuesday in a statement. The outlook for the company’s new rating is negative.

Moody’s warned two months ago that it might take action. Hong Kong-based Noble appeared to counter the threat earlier in December when it agreed to sell the rest of its agriculture unit to China’s Cofco Corp. for at least $750 million. But Moody’s said Tuesday that despite that deal, the company’s liquidity is still constrained. It said Noble suffers from low profitability and negative cash flow from “core” operations, excluding the proceeds from asset sales.

"The downgrade also reflects the uncertainty as to whether or not these factors can be improved sustainably and materially, given our expectations of a prolonged commodity downcycle, and the consequent negative sentiment impacting Noble and commodity traders in general," Joe Morrison, a vice president and senior credit officer at Moody’s, said in the statement.

“While we respect Moody’s decision, we are of the firm view that, once the just announced Noble Agri deal closes, our rating metrics will substantially exceed those required of an investment-grade credit,” Noble said in an e-mailed statement. “We are confident that the deal will be approved by our shareholders and will close before the end of February.”

Noble shares have fallen 61 percent in Singapore this year amid criticism from a group called Iceberg Research, whose members are anonymous, and investor concern that tumbling commodity prices will hurt its business. Noble has rejected the allegations, and said in November it was confident that it would meet targets set out by Moody’s to maintain an investment-grade rating.

Noble’s 6.75 percent bonds maturing in 2020 have fallen 36 percent in the past year to 69.125 cents after trading as high as 114.125 cents in July 2014, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. They yield 17.7 percent.

Noble is rated BBB- by Standard & Poor’s, the lowest investment grade.

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