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.
Media contact
Amy Lo
(603) 7628 1078
amy@ram.com.my
© Press Release 2015
