Noble Group Ltd., the commodity trader battling criticism of its accounting, saw its credit rating cut to junk by Moody’s Investors Service on concerns about the company’s liquidity amid a broad downturn in prices for energy and raw materials.
Moody’s lowered Noble’s senior unsecured bonds to Ba1 from Baa3, the ratings company said Tuesday. The outlook for the company’s new rating is negative.
Moody’s warned two months ago that it might take action. Hong Kong-based Noble appeared to counter the threat earlier in December when it agreed to sell the rest of its agriculture unit to China’s Cofco Corp. for at least $750 million. But Moody’s said Tuesday that despite that deal, the company’s liquidity is still constrained. It said Noble suffers from low profitability and negative cash flow from “core” operations, excluding the proceeds from asset sales.
“The downgrade also reflects the uncertainty as to whether or not these factors can be improved sustainably and materially, given our expectations of a prolonged commodity downcycle and the consequent negative sentiment impacting Noble and commodity traders in general,” Joe Morrison, a vice president and senior credit officer at Moody’s, said in the statement.
In an e-mailed statement, Noble said: “While we respect Moody’s decision, we are of the firm view that, once the just announced Noble Agri deal closes, our rating metrics will substantially exceed those required of an investment-grade credit. We are confident that the deal will be approved by our shareholders and will close before the end of February.”
Noble is rated BBB- by Standard & Poor’s, the lowest investment grade.