• Moody's affirms Noble's Baa3 ratings; outlook stable

  • Moody's
    Hong Kong, May 08, 2015

    Moody's Investors Service has affirmed Noble Group Limited's Baa3 issuer and senior unsecured bond ratings, as well as the provisional (P)Baa3 rating on its MTN program, following the announcement of its results for the fiscal first quarter ended 31 March 2015.

    The outlook for the ratings is stable.

    RATINGS RATIONALE

    "Noble deployed proceeds from last year's sale of a 51% stake in Noble Agri to grow the business. Although on a last 12 months (LTM) basis leverage rose and interest coverage declined, the levels remain in line with expectations for the current ratings," said Joe Morrison, a Moody's Vice President and Senior Analyst.

    Noble reported overall year-over-year volume growth for the quarter in each of its segments and a 25% increase in energy coal volumes. This indicates the strength of its market position and franchise in an environment in which commodity prices have been under significant pressure, says Moody's.

    The company allocated significant capital to expand its trading in oil liquids, as reflected in the increase of $1 billion in working capital, which was partly funded by debt. At the same time, the LTM adjusted EBITDA of about $1.7 billion was slightly lower than its $1.8 billion in 2014, as commodity price declines pressured profits.

    As a result, adjusted net debt to EBITDA, excluding adjustments for Noble Agri, on an LTM basis was about 3.6x, up from about 3.0x in 2014. Adjusted EBITDA interest coverage declined to about 3.7x from 3.9x, and retained cash flow to debt fell to about 16.3% from the 20.5% level of 2014.

    Moody's believes Noble has an adequate liquidity profile, and will continue to have good access to the capital markets. At the end of the quarter, the company maintained liquidity headroom of about $4.5 billion; with available committed bank facilities of about $3.7 billion and readily available cash of about $770 million. This is more than sufficient to cover the next twelve month's debt maturities of about $2.2 billion, the potential $500 million in capital commitments related to X2 Resources, and the modest amount of maintenance capital expenditure required after the spinoff of Noble Agri.

    As an evidence of Noble's ability to access the funding market, the company announced that its banks had fully committed to providing a $2.25 billion credit facility, comprised of one-year and three-year tranches. Pricing for the both the one-year tranche and three-year tranche are lower than that of Noble's most recent facilities.

    Moody's expects Noble's debt and working capital requirements to continue to increase as the company further expands its oil liquids and power & gas businesses. However, these businesses should also become material contributors to profitability and cash flow in the near-term. The inventories associated with these businesses are also readily marketable and largely short-term.

    The stable outlook reflects Moody's expectation that the company will execute on its growth plans with modestly higher leverage and will maintain adequate liquidity. Given the company's growth plans, Moody's does not foresee upward pressure on the ratings in the near term.

    Downward rating pressure could emerge if Noble increases leverage such that net debt/EBITDA rises above 3.5x-4.0x for a prolonged period or its liquidity deteriorates, having a negative effect on its business profile.

    The principal methodology used in this rating was Trading Companies published in March 2015. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

    Noble is the largest global physical commodities supply chain manager in Asia by revenue. Its diversified activities across the supply chain include the sourcing, storage, processing, transportation, and distribution of over 20 commodity products.

    Noble has revised its reporting segments to Energy, Gas & Power, Mining & Metals, and Corporate. Noble is partially back-integrated into some commodities through its ownership of assets and infrastructure across the supply chain.

    Headquartered in Hong Kong, Noble has 60 offices worldwide and 1,900 employees. The company is publicly traded on the Singapore Stock Exchange. Founder and Chairman, Richard Elman, holds about 21% of Noble. China Investment Corporation (CIC), the Chinese sovereign wealth fund, and the Korea Investment Corporation (KIC), the South Korean sovereign wealth fund, own about 9% and 1%, respectively.