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Moody's cuts Noble to junk credit rating despite Agri deal

Credit ratings agency Moody's has cut Noble Group's rating to junk due to liquidity concerns, capping a year of trouble for the Hong Kong-based commodities trader amid a rout in raw materials.

The downgrade will see Noble's senior unsecured bond ratings drop to Ba1, from the lowest investment grade of Baa3. The outlook for the rating is negative.

The cut to junk territory will likely increase Noble's borrowing costs and make it harder for the trader to refinance debt to shore up its finances.

Moody's sounded a warning on Noble's rating in November by announcing a review of the company's investment grading.

Noble's shares tanked as much as 5.7 percent in early trade Wednesday on the downgrade.

In a move that was read as an attempt to counter the review, the Singapore-listed company reached an agreement to sell its stake in Noble Agri, its joint venture with COFCO International, to the Chinese state-owned giant for $750 million in cash.

While the sale will improve Noble's liquidity profile and adjust net debt to earnings before interest, tax, depreciation and amortization (ebitda), its liquidity position "remains constrained", said Moody's in a statement.

The global commodity downturn has also become more severe over the last one to two months, said Moody's.

"These negative conditions might erode Noble's access to funding and could therefore challenge its profitability," the agency added.

Noble has been under scrutiny since February when a firm called Iceberg Research published a report, alleging that the Singapore-listed trader's accounting treatments were "unusual," result in "fabricated" profit and "intentionally misleads credit agencies and investors."

Noble has said it had identified Iceberg as Arnaud Vagner, a disgruntled ex-employee it claimed to have fired in 2013; the company filed a lawsuit against Vagner in Hong Kong, alleging "conspiracy to injure." Iceberg has previously refused to confirm or deny whether Vagner is a principal.

Noble's shares have fallen 60 percent since the Iceberg attack, culminating in a shareholder meeting in August at which it promised to lay bare its finances.

Noble has consistently and vehemently denied the allegations and has taken multiple steps to improve its disclosures to investors, including commissioning an independent review of its accounting from PricewaterhouseCoopers (PwC), which found Noble's accounting was in line with international standards.

Responding to Wednesday's downgrade, Noble said that while it respected Moody's decision, it was of the view that its rating metrics would "substantially exceed those required of an investment grade credit" when the Noble Agri deal closed.

"It is unfortunate that this transaction has seemingly, in our view, been outweighed by Moody's negative view of the commodity producer segment," the trading house said in a statement.

Standards and Poor's is also reviewing Noble's investment grade rating.

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