Noble Group’s credit rating has been slashed to “junk” status by Moody’s Investors Service as the commodities trader struggles amid a slide in prices of key resources.
The ratings cut reflects concerns over the Hong Kong-based group’s liquidity, its low profitability and negative free cash flow from operations, Moody’s said on Tuesday.
“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,” the Wall Street Journal cited Moody’s as saying in a statement.
Over the past couple of months, the global downturn in commodities prices has become more severe, which could bring more pressure to bear on companies such as Noble, Moody’s said.
Last month, Noble announced an 84 percent drop in third-quarter profit because of losses in its metals and mining segment and associated firms, including its agricultural arm Noble Agri, the Journal noted.
Noble recently announced plans to sell its remaining stake in Noble Agri to Chinese state-backed grain trader Cofco for US$750 million, in a bid to shore up its finances.
In response to Moody’s decision, Noble said it respected the ratings firm’s call, but said the sale to Cofco should be enough for the firm to “substantially exceed” the requirements for investment-grade credit.
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