London 07/01/2016 - Credit ratings agency Standard & Poor's (S&P) has downgraded its rating for bonds issued by commodities house and base metal trader Noble Group to junk today, although Fitch reaffirmed its stable rating.
S&P moved its rating for long-term Noble Group bonds to BB, BB+ and cnBB+ with a negative credit outlook from BBB-, BBB- and cnBBB+ respectively, indicating that it now sees major uncertainties over Noble's ability to meet its financial commitments.
BBB ratings from S&P illustrate that companies have the capacity to meet commitments but a move to BB indicates 'sub investment-grade'.
A junk credit rating usually means that banks will be less likely to issue credit to a company, while that company would also probably have to raise the interest rates on bonds issued to attract buyers.
Still, Noble denied that the move is affecting its business.
"To date, the increased collateral calls have been immaterial and below the previously indicated range of $100mm-$200mm. The current low price environment continues to offer opportunities and plays to our strengths as an asset-light supply chain manager," it said.
Commodities prices have dropped sharply, with base metals around multi-month lows and close to multi-year lows in some cases.
And over the past week, the Chinese government have twice halted trading in equities after two seven-percent drops in the SCI.
FITCH REAFFIRMS
Ratings agency Fitch, another of the "Big Three" that includes Moody's as well as S&P, reaffirmed Noble's BBB-/Stable credit outlook, citing "increased collateral requirements following a series of credit events in 2015 is manageable given its improved liquidity following asset sales".
"We welcome Fitch's belief that the additional collateral requirements from a credit rating downgrade can be adequately covered following our disposal of Noble Agri," Noble said in a statement.
Noble agreed to sell its agricultural commodities assets to China's Cofco for $750 million cash late in December.
(Editing by Mark Shaw)