No­ble Group share­hold­ers face wipe­out on court fil­ing

The Star Malaysia - StarBiz - - Foreign Features - By JACK FARCHY, JAVIER BLAS and LUCA CASIRAGHI

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

— Reuters

Mam­moth re­vamp: The com­pany may im­ple­ment the re­struc­tur­ing through a court-ap­pointed of­fi­cer af­ter Sin­ga­porean reg­u­la­tors halted a key el­e­ment of the first-choice plan.

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