Fitch puts Noble on negative rating watch
The last remaining credit rating agency with whom Noble
Group still enjoys an investment-grade rating might now be changing its mind.
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Andrea Soh
07 May 2016
The last remaining credit rating agency with whom Noble Group still enjoys an investment-grade rating might now be changing its mind.
Fitch Ratings on Friday said it was placing the largest commodity trader in Asia on a negative rating watch, as Noble turns to shorter-term and secured financing to reduce financing costs.
"This will increase the risk profile of the company, reduce its financial flexibility and potentially put strain on its senior unsecured debt level," said Fitch.
Noble, which has adopted an asset-light strategy over the past few years, plans to move from using long-term debt to cheaper short-term secured funding to align its debt structure with its assets.
The group had historically funded itself using revolving facilities and long-term debt, as it owned mining assets and sugar mills.
The rating watch will be resolved when Noble successfully completes the refinancing of its revolving credit facility due in May, and when it announces its first-quarter results next Thursday, said Fitch.
Besides the focus on short-term debt financing, the new assessment will take into account the poor operating environment and Noble's stronger balance sheet after it repays debt due in the short term, it added.
Fitch is expecting Noble's ratio of working capital to total debt to rise from 0.96 times as at end-December 2015 to 1.1 times after the repayment of its debt in the first quarter.
The other two rating agencies, Standard & Poor's and Moody's, had in January cut Noble's credit rating to "junk". Fitch then said it believed Noble's additional liquidity after the sale of its agriculture unit would help it manage increased collateral requirements.
Noble's shares fell 4.7 per cent, or 2 cents, to 40.5 Singapore cents amid a broader market retreat on Friday.