SINGAPORE Noble Group's troubles worsened after S&P warned of a risk the struggling commodity trader won't pay its debt and as sources told Reuters a potential investor backed out, triggering a one-third fall in its shares and a dip in its bonds.
Late on Monday, S&P Global Ratings cut Noble's corporate credit ratings by three notches deeper into junk territory, to CCC+ from B+ and said the outlook was negative.
"The negative rating outlook reflects the potential that Noble's cash flow and profitability will remain weak for the next 12 months, with the risk of nonpayment of its debt obligations due to weakened access to funding," the ratings agency said in a statement.
S&P's move comes after Noble reported a shock quarterly loss in May and warned that it would not be profitable for the next two years. This pummeled its stocks and bonds.
Citing sources, Reuters reported on Monday that China's state-owned Sinochem is no longer pursuing an investment in Noble due to concerns over its finances and business outlook.
The setbacks come at a time when Noble is negotiating a crucial rollover of a $2 billion credit facility secured on its inventories and working capital.
Noble declined to comment on S&P's report.
Lorraine Tan, director of equity research in Asia at Morningstar, said Noble faced a big refinancing challenge.
"Their survivability depends on their ability to refinance the borrowing base facility," she said and placed her coverage of Noble under review, pending news.
"There is a question mark again on how much more they would have to pay in the refinancing," Tan said.
Noble asked for a trading halt after its shares dropped as much as 32 percent in heavy volume to S$0.40, the lowest since 2001, in the first 36 minutes of trading on Tuesday. Noble is due to issue a statement after the Singapore exchange queried the company.
Its bonds due 2022 fell to a price of 39.33 cents on the dollar from 42.84 cents, and down some 58 points since early May when Noble first warned of the quarterly loss and also flagged losses for the next two years.
Moody's and Fitch downgraded Noble's credit ratings subsequently.
Noble has struggled ever since Iceberg Research questioned its accounts in early 2015 and following a brutal downturn in commodity markets. The company has stood by its accounts.
The combined impact has been a collapse of its share price, credit downgrades, management upheavals and a series of writedowns, asset sales and fundraising. Noble's market value has shrunk to about $400 million now from $6 billion in February 2015.
This month, the company also kicked off a strategic review of its businesses under new Chairman Paul Brough.
(Reporting by Anshuman Daga and Miyoung Kim; Editing by Muralikumar Anantharaman)