Noble rating cut to ‘junk’ as commodities continue to tumble

Shares of Asia’s biggest commodities trader by revenue, Noble Group, plunged over 9 per cent after its credit rating was cut to “junk” status by Moody’s, capping a tumultuous year for the firm and the commodities market in general.

The downgrade to junk could raise funding costs for Hong Kong-headquartered Noble, already struggling with its finances.

“The downgrade of Noble’s ratings reflects Moody’s concerns over the company’s liquidity,” said Joe Morrison, a Moody’s senior credit officer, adding it also reflects its low profitability and consistent cash outflow from core operating activities.

“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 down-cycle.”

READ MORE: Noble Group ‘confident’ of meeting Moody’s targets in review

The downgrade came even after Singapore-listed Noble last week inked a deal to sell its remaining 49 per cent stake in its agricultural commodities unit for US$750 million. Noble expects the deal to be completed by February.

Noble shares have this year fallen nearly 65 per cent, reeling from attack after attack by short-sellers as well as precipitous falls in prices of energy, metals and agricultural commodities that it produces, processes and distributes.