Shares in the once-powerful Hong Kong-based commodities trader have lost a third of their value and were eventually suspended from trading following a warning by a ratings agency that it faced a possible debt default.Noble shares dropped 32 percent in just over half an hour on Tuesday morning, causing the company to request a trading halt. The sell-off in the Singapore-listed company came after Noble’s bond prices collapsed on Monday as investors prepared for the prospect of a possible default.
The company – once Asia’s largest independent commodities trader – has been hammered in recent years as plunging commodity prices dismantled its bottom line while it has also suffered a ratings downgrade and allegations of irregular accounting practices.
Late Monday, ratings agency Standard & Poor’s (S&P) said the firm risked defaulting on its debts in the next 12 months. It also downgraded its ratings by three notches.
“Noble could face liquidity shortfalls in the next 12 months if the Hong Kong-based commodity trading company continues to make losses and it is unable to stabilize its profitability,” the agency said.
According to S&P the negative outlook reflected the potential that the company would face distress and a nonpayment of its debt obligations over the next 12 months.
Commodities’ crisis
Noble needs $2 billion in credit ahead of the maturity next month of $620 million in loans under an existing facility. The company reported a loss of almost $130 million in the first quarter and said it would not return to profitability until at least 2018-2019.
“Over the next three years, it’s got huge amounts of debt maturing and right now the company is deeply trapped, unable to make any profit,” Margaret Yang, a strategist at CMC Markets in Singapore, told Bloomberg News. A default over the next year is “totally possible”, she added.
Noble’s stock has been plunging since mid-2014, shedding more than 80 percent as commodities prices were hit by a worldwide supply glut, weak global demand and slowing growth in key market China.
The company has been selling assets and cutting costs to boost its finances. But S&P Global Ratings said that its debt burden is unsustainable given its current earnings trajectory. Shares briefly rallied in February on speculation that Noble was in talks with a strategic investor, which Bloomberg News said was China’s Sinochem Group.
uhe/mds (Reuters, AFP)
