Coal Weighs on Noble, Triggers $1.2 billion Writedown

Noble warns of Q4 loss, first annual loss since 1998.

Commodity trader Noble Group (NOBGF) warned of its first full-year loss in nearly 20 years on Tuesday, blaming a $1.2 billion writedown on low coal prices and prompting a credit rating downgrade by Moody's (MCO).

Ratings agency Moody's cut Noble's corporate rating and senior unsecured bond ratings to Ba3 from Ba1, while S&P said the loss was credit negative and could complicate refinancing a credit facility in May.

"The downgrade reflects the impact of the unexpected assets write-down on Noble's business and financial profile," Joe Morrison, Moody's senior credit officer, said in a statement.

Singapore-listed Noble, which has sought to reassure investors after an accounting dispute and as tumbling commodity markets battered its stocks and bonds, set its 2020 and beyond estimate for thermal coal contracts at $55 per tonne - a level that it said was 14 percent below the average market consensus.

Australian spot cargo prices for thermal coal are currently trading around $53.70 per tonne.

A bleak outlook for coal and other commodities means firms like Noble or Glencore (GLCNF) not only face falling demand for many of the goods they trade, but also declining values for many assets they own, such as storage facilities or vessels.

"What's driving this is their decision to be more prudent in terms of fair value prices. One potential outcome is that it cleans up the balance sheet from the banks' perspective," said Conrad Werner, an analyst at Macquarie Equity Research.

Shares in Noble have lost nearly 70 percent over the past year after Iceberg Research alleged it was inflating its assets by billions of dollars. Noble rejected the claims and board-appointed consultants PricewaterhouseCoopers found it had complied with international accounting rules.

Analysts had forecast a net profit from Noble, which is due to report full earnings on Thursday, although their projections had varied widely.

Noble, one of the world's biggest traders of commodities from coal to iron ore to oil, stressed that it generated positive cash flow in the fourth quarter and that it expects to have $1 billion in further liquidity by the end of March including proceeds from its sale of its stake in Noble Agri.

It also said that its cash balance stood at a record $1.95 billion as of end-December.

Noble's stock and bond investors have been concerned about the company's ability to refinance its debt. Both Standard & Poor's and Moody's have cut its ratings to junk.

It has about $2.5 billion worth of debt due this year, according to Thomson Reuters LPC data. Noble's bonds and credit default swaps are trading at depressed levels, which Noble has said is due to illiquid markets.

Reporting by Anshuman Daga