Fitch: Noble's Liquidity Crunch Temporary
Noble's liquidity headroom at end-2Q16 was USD868m, comprising USD668m of unrestricted cash and equivalents and around USD200m of undrawn committed facilities, after the company drew down USD800m of committed facilities to repay debt. This left Noble's liquidity at 0.5x inventory, compared to 1.3x at end-1Q16.
Fitch expects Noble's liquidity ratio to return above 1.0x in 3Q16, as the company is likely to generate approximately USD900m of liquidity; USD500m from its rights offering, assuming cash proceeds are used to repay debt, and the rest from working capital reductions.
Noble's 2Q16 trading volume of 55 million tonnes was similar to the previous quarter, when higher energy volumes were offset by lower volumes in the less profitable metal and logistic businesses. We expect the company's 3Q16 trading volume to remain stable, which suggest a 25% yoy decline.
The de-emphasis on business scale will remain until the sale of Noble Americas Energy Solution (NAES) business is completed, as the company is focused on deleveraging and strengthening its liquidity position. A significant reduction in Noble's business scale or EBITDA generation could put pressure on its ratings. We will evaluate how the sale affects the company and how proceeds will be utilised once the sale is completed.