The embattled commodity trader yesterday set a shareholder meeting for the end of this month to approve its controversial $3.5bn debt-restructuring deal. The company had originally wanted to complete the plan by July, but it has now set the deadline for the end of the year.
It’s a final step in the drawn-out rescue of what used to be Asia’s largest commodity trader, brought to its knees by billions in losses, defaults, lawsuits and public sparring with investors.
The proposal already has the backing of most senior creditors and more than 30% of shareholders, but failure to secure a deal could end in a liquidation with a recovery rate for creditors of as little as 20%, according to KPMG.
“It is now critical that we complete the restructuring as soon as possible to enable the group to once again operate with a sustainable capital structure and to focus on capitalizing on the growing opportunities in the Asian commodities markets,” Chairman Paul Brough said in a statement yesterday.
Should shareholders vote in favour, “Noble will enter the final procedural stages of its restructuring.”
The deal is deemed to be “fair and reasonable,” and not prejudicial to shareholders, according to Noble’s independent financial adviser, Provenance Capital. Noble had appointed Provenance in May to assess whether the deal is fair, complying with a request from the Singapore exchange.
“Assuming the restructuring is passed, the focus would then shift to the company’s ability to turn round operationally for creditors to recover value,” said Neel Gopalakrishnan, senior credit strategist at DBS Group Holdings. “That could be as much of a challenge as the restructuring process has been. The business being working capital intensive, its ability to raise capital following a fairly unfriendly restructuring will need to be seen.”
Senior unsecured creditors would receive only $890mn or 19.5% of the amount owed over a three-to-five year liquidation in a low-case scenario, and about $1.3bn in a high-case one, according to a KPMG analysis contained in the circular.
Noble Group is targeting the restructuring to be effective no later than December 31. The company has irrevocable support for its plan from founder and largest shareholder Richard Elman, Abu Dhabi-based Goldilocks Investment Co and a consortium including Value Partners Ltd and Pinpoint Asset Management.
Senior creditors will have 70% of the new company, with 20% held by existing shareholders and 10% by management. At the August 27 meeting, equity investors will also have to approve a so-called ‘whitewash’ resolution which waives the requirement for senior creditors to make an offer for all the shares because they will hold more than 30% of the equity.
The new Noble board will have 10 directors, including Elman who’ll serve as an executive director and a non-executive Goldilocks nominee. Current Noble Group chief executive officer William Randall and CFO Paul Jackaman are expected to have the same roles in the new entity. Chairman Paul Brough will not have any management shares, no direct or indirect interest in the restructuring and is not listed as a potential New Noble board member.
The company has warned that it will post an overall net loss of $115mn to $140mn, driven mostly by restructuring expenses and finance costs, in the three months to June, its sixth consecutive quarterly shortfall. The performance took the net loss for the first six months to $185mn to $210mn, and follows a shortfall of $5bn in 2017. The trader has said it had a negative net asset position of about $1bn as of June 30.
Once worth more than $10bn, the company has seen its market value plummet to less than $130mn since criticism of its accounting surfaced in 2015 from a then-unknown group called Iceberg Research. The company rejected the criticism. Shares are down 37% this year and closed at 12.7 Singapore cents yesterday. The 2022 bonds were flat.