SINGAPORE: Trading in embattled commodities firm Noble Group was halted Tuesday after it plunged almost a third to a 16-year low in reaction to a warning from Standard & Poor’s that it faced a possible debt default.
The once-mighty company has been hammered in recent years as plunging commodity prices dismantled its bottom line while it has also suffered a ratings downgrade and allegations of irregular accounting practices.
Late Monday ratings agency S&P said the Singapore-listed firm risked defaulting on its debts in the next 12 months if losses continued and profitability was not restored. It also downgraded its ratings by three notches.
“Noble could face liquidity shortfalls in the next 12 months if the Hong Kong-based commodity trading company continues to make losses and it is unable to stabilise its profitability,” the agency said.
“The negative outlook on Noble reflects the potential that the company will face distress and a nonpayment of its debt obligations over the next 12 months.”
Noble needs $2 billion in credit ahead of the maturity next month of $620 million in loans under an existing facility.
Shares in the firm collapsed as much as 32 percent in a blistering half-hour sell-off after the open, prompting a trading halt. It was down more than 28 percent at Sg$0.42 by the time trading in the firm finished — lows not seen since 2001.
The trading halt was called pending an announcement, Noble said.
The company reported a loss of almost $130 million in the first quarter and said it would not return to profitability until at least 2018-2019.
Its stock has been plunging since mid-2014 — shedding more than 80 percent — as commodities prices were hit by a worldwide supply glut, weak global demand and slowing growth in key market China.
The company has been selling assets and cutting costs to boost its finances and S&P Global Ratings said last week that its debt burden is unsustainable given its current earnings trajectory.
Shares had rallied in February after the company said it was in talks with a strategic investor, which Bloomberg News said was China’s Sinochem Group.
“Over the next three years, it’s got huge amounts of debt maturing and right now the company is deeply trapped, unable to make any profit,” Margaret Yang, a strategist at CMC Markets in Singapore, told Bloomberg News. A default over the next year is “totally possible”, Yang added.