Direr straits await Noble as counterparties slash credit lines

Are there any other skeletons in its closet?

Noble Group has been navigating extremely choppy seas in the past six months, but the group’s recent suffering may just be a mild prelude of worse things to come if it loses the faith of its creditors.

Concerns over Noble’s creditworthiness flared anew after ratings agency Moody’s downgraded its outlook to negative, coupled with reported statements from Noble’s CEO noting that some counterparties have reduced the group’s lines of credit prior to the release of PwC’s assurance review.

“The most important stakeholders are the counterparties that allow Noble to function as a business entity, such as the banks, creditors, suppliers and buyers who trade with Noble that will ultimately determine its fate,” said Nicholas Teo, analyst at CMC Markets.

He highlighted that while Noble will be in real trouble if any counterparty were to pull or significantly narrow the credit and business lines extended to the company for any reason.

“This may trigger an unintended chain of actions for the company to try to make up for the ‘shortfalls’. History has shown that the consequence of such a ‘virulent’ string of events may be rather dire,” Teo noted.