HONG KONG (Reuters) - Fitch Ratings cut commodity trader Noble Group’s debt rating on Friday to two notches above default, citing the company’s commencement of discussions on a debt restructuring.
The agency lowered the rating by a notch to ‘CC’, which according to its rating criteria defines a situation where “default of some kind appears probable”. Fitch previously had rated Noble ‘CCC’, which stated that “default is a real possibility”.
Noble has started talks with stakeholders to restructure its debt and secure trade finances in a bid to keep its business running, just weeks after it agreed to sell some assets and flagged a massive loss.
Its bonds are already trading at distressed levels and its most recently sold bonds, those due in 2022, have fallen to a third of their issue price in less than nine months.
Rival Moody’s has a ‘Caa3’ rating on Noble, with a negative outlook. The rating reflects a significant probability of default within the next 12 months, Moody’s has said.
And S&P Global has assigned a ‘CCC-minus’ rating with a negative outlook on Noble.
Noble, once a global commodity trader with ambitions to rival the likes of Glencore or Vitol, has shrunk to an Asian-centric company focused largely on coal and freight trading after a crisis-wracked two years that have forced it to slash jobs and sell assets.
Hong Kong-based Noble was plunged into crisis in 2015 when Iceberg Research questioned its accounts. Noble stood by its accounts but a commodities downturn added to the turmoil, triggering a share price collapse, credit downgrades, writedowns and management changes.
Fitch said the company’s liquidity situation was tight at the end of the last quarter as it had $262 million in unrestricted cash and $800 million in undrawn credit facilities against its $1.7 billion short-term debt.
Noble has two large tranches of debt maturing in 2018: $400 million of US-dollar notes due in March and $1.1 billion of unsecured revolving credit facilities and term loans due in May.
Beyond that the company has two global bonds aggregating $2 billion due in 2020 and 2022.
“It is unclear how Noble will address these maturities without a change to its capital structure, given the uncertainties regarding the profit generation of its operations...,” Fitch said.
Reporting by Umesh Desai; Editing by Muralikumar Anantharaman