By REUTERS
Standard and Poor’s warned on Tuesday it may cut Noble Group’s credit ratings, which would take the ratings to junk status, saying it is worried about the commodities trader’s weakened liquidity and leverage positions.
It became the second ratings agency to flag a possible drop to junk grade for Noble’s corporate debt after Moody’s Investors’ did so earlier this month.
The company’s bonds are currently trading at levels considered junk, quoted in the market in price terms rather than in spread terms usually used for investment grade debt.
Its perpetual bond is trading at around 57 cents on the dollar, down by five points this month, after being issued at par in June last year.
Noble, already under pressure in a weak commodities market, came under a spotlight in February when blogger Iceberg Research alleged the company was inflating its assets by billions of dollars by not fairly representing the value of its commodity contracts. The company has rejected the claims.
Standard & Poor’s highlighted the decline in Noble’s liquid inventory and credit lines during the third quarter, linking the deterioration to the fall in commodities prices.
But it added that management’s commitment to raise at least US$500 million (RM2.14 billion) in new capital could help restore the company’s liquidity position and financial leverage, and would be key to maintaining its current rating.
The ratings agency said it will make a decision on a possible downgrade from its current rating of “BBB-” in three months.
Cuts to junk category are significant because some investors are barred from buying bonds that are not rated investment grade.
Noble shares were down 2.4% on Tuesday at S$0.40 per share, a third of the level they were at before Iceberg’s allegations surfaced.
— By Umesh Desai
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