Noble Credit Rating Cut by S&P Despite Efforts to Raise Cash

  • Rating cut to B+ from BB-; second reduction in six months
  • S&P says Noble’s liquidity position is ‘less than adequate’

Noble Group Ltd.’s credit rating was cut by S&P Global Ratings for the second time in six months, citing its weakened liquidity position and higher funding costs despite recent efforts to raise cash.

The rating was lowered to B+ from BB-, with a negative outlook, according to a statement on Wednesday. The downgrade comes after a turbulent few weeks for the company.

Noble recently announced the departure of Chief Executive Office Yusuf Alireza, announced a rights issue to raise about $500 million with support from China’s sovereign wealth fund and plans to sell a business that used to be considered a core asset. It also announced plans for the succession of founder and Chairman Richard Elman.

“The negative outlook reflects the elevated refinancing risk over the next 12 months and risk to the sustainability of Noble’s profit and cash flow generation amid heightened volatility in the commodities market," S&P wrote in an e-mailed statement.

Stock Collapse

Elman, who founded Noble Group in Hong Kong in the late 1980s, is trying to turn around the company after the shares collapsed during the commodity rout and it faced allegations of improper accounting. Noble Group closed in Singapore, where the company is listed, at 23 Singaporean cents. At the beginning of last year, it traded above S$1.

The sale of Noble Americas Energy Solutions has “already generated significant interest” from potential buyers, the company said earlier this week. It appointed Morgan Stanley and HSBC Bank Plc to handle the sale and aims to close a deal by the second half of this year.

Noble this month offered 1 rights share for each existing share at 11 Singapore cents, a 63 percent discount from the previous day. Elman, the largest shareholder, agreed to take less than his full entitlement. China Investment Corp., Beijing’s sovereign wealth fund and third-largest shareholder, agreed to take its full portion. CIC will get a second seat on the board.

S&P said that despite a recent refinancing, the sale of more assets and equity raising, it measured Noble Group’s liquidity as "less than adequate," in part because the company would need to refinance a large chunk of its loans over the next year.

"Continued commitment from banks will depend on the successful execution of the company’s business rationalization," S&P said. "The departure of Noble’s CEO and the stepping down of its chairman may impact the company’s strategy and execution."

Noble American depositary receipts fell 2.9 percent to $3.36 in New York Wednesday.

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