Noble Group shareholders face wipeout on court filing
NOBLE Group Ltd says it intends to push through its mammoth debt-for-equity restructuring by an “alternative process,” signalling it’s likely to file for insolvency in a move that could wipe out existing shareholders and may put its remaining business at risk.
The company may implement the restructuring through a court-appointed officer, the trader said yesterday after Singaporean regulators halted a key element of the firstchoice plan – allowing shares in the new corporate entity to be listed in the city-state. The statement didn’t give further details.
The step follows an extraordinarily turbulent period in the company’s drawn-out battle to survive after regulators announced a probe into its accounts last month, and then followed up by saying they wouldn’t allow the relisting, effectively blocking the preferred rescue plan that’s been more than a year in the making.
Noble Group was considering a “pre-pack” administration, a procedure that allows for a restructuring in court through a pre-agreed plan with creditors, a person familiar said before yesterday’s statement.
The move – should it end in administration – is a significant setback for the company’s senior creditors, including hedge funds Taconic Capital Advisors, Varde Partners and Owl Creek Asset Management, as well as Deutsche Bank AG and ING Groep NV. Noble Group’s board had consulted with the ad hoc group of creditors before the latest decision was taken, the company said.
Core business concern
“It remains to be seen what form and how long the alternate restructuring takes,” said Neel Gopalakrishnan, senior credit strategist at DBS Group Holdings Ltd. “The longer the uncertainty lasts, it is going to delay the recovery in the core business that the restructuring has been premised on.”
Noble Group’s existing shareholders have already seen the value of their stakes pum- meled as the stock price tanked. Top holders – who may lose out in an insolvency – include founder Richard Elman, China’s sovereign wealth fund, and Goldilocks Investment Co. Under the initial plan, stockholders were to get 20% of the equity in the restructured business.
The once-giant trader has been wracked by years of crisis after accusations of inflated profits, first made by Iceberg Research in 2015. After posting huge losses and write- downs, Noble had pinned its hopes for survival on the consensual restructuring masterminded by chairman Paul Brough.
Plan B
In August, Noble said in a circular if its first choice failed, the alternative restructuring, or Plan B, would involve filing for administration in the UK. Under that scenario, creditors would aim to swiftly take con- trol of assets, and existing shareholders and perpetual bondholders could be wiped out.
It’s considering different jurisdictions for the filing, including Bermuda, according to people familiar with discussions.
The plans are still under review and could change.
Even if that happens, there are still risks. For example, the move could trigger clauses allowing some counterparties to walk away from supply contracts, making it harder for Noble to stay in business. The probe could also continue to affect Noble even if it ceases to be a public entity.
On Thursday, the authorities said there were “significant uncertainties about the financial position of New Noble,” highlighting its net asset value would be lower than declared in simulated statements that used positions from the Accounting and Corporate Regulatory Authority. In previous comments, regulators have said they’re looking at accounting issues at Noble’s Singapore subsidiary from 2012 to 2016.
In its statement yesterday, Noble Group said the simulated financial statements were submitted on a confidential basis and “do not represent the views of the company.” It added that its subsidiary disagrees with the positions taken by ACRA, and it plans a comprehensive response.
Noble Group said it regrets that after almost 19 months of engagement, “it has been informed that MAS and SGX RegCo have decided not to allow the company to transfer its listing status to New Noble,” according to the statement.
That development is “very disappointing,” it said. — Bloomberg