Published on 21 April 2015
RAM Ratings is of the view that recent
allegations made by Muddy Waters LLC against Noble Group Limited (Noble
or the Group) have no immediate impact on the Group’s credit profile, at
this juncture. Noble’s RM3 billion Multi-Currency Sukuk Murabahah
Programme (2012/2032) is rated at AA2, with a stable outlook.
Noble has refuted the allegations made by Muddy
Waters LLC, which mainly relate to earnings manipulation in the
acquisition and disposal of one of its associates in 2011. This is the
second entity that has attacked the Group this year. In February 2015,
Noble was targeted by Iceberg Research in a series of reports alleging
overvaluation of commodities contracts and associates, corporate
governance issues, amongst others. Similarly, those statements were
rebutted by the Group.
While this development in itself does not affect
Noble’s ratings, we remain mindful of the potential broader
implications, particularly in terms of funding and franchise.
Our observation of other such cases in the past
indicates that negative publicity can affect equity and bond prices and
curtail access to funding sources in the short term, even in instances
when allegations had proven to be groundless. In our opinion, liquidity
is extremely important to commodity traders like the Group, who rely on
access to external funding to finance the working capital requirement of
this low-margin high-volume business. We understand that the
allegations have not impacted Noble’s ability to access the bank market
and the Group is currently in the process of refinancing its revolving
credit facilities.
As at end-December 2014, Noble had around USD550
million of unrestricted cash while its short-term borrowings stood at a
higher USD1.04 billion. We understand that the Group has banking
relationships with over 100 banks while its sizeable committed
unutilised credit lines (end-December 2014: USD4.7 billion) serve as a
healthy liquidity buffer. RAM will continue to monitor the developments
at Noble closely.
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