Noble Group says shareholders risk wipeout if debt deal falters

Noble Group Ltd. booklets sit on a table before a news conference during an investor day in Singapore, on Monday, Aug. 17, 2015. Photographer: Nicky Loh/Bloomberg

Embattled commodity trader Noble Group Ltd. issued a defense of its planned restructuring, saying that if shareholders vote down the plan, it will probably enter insolvency proceedings in the U.K. and existing equity holders risk being wiped out.

“If the primary restructuring is not approved by shareholders, the board will have no option but to put the company into insolvency proceedings,” the Hong Kong-based company said in a statement, responding to queries from the Singapore exchange. At present, the plan agreed with creditors needs approval by a simple majority of shareholders, it said.

After a three-year crisis, the fate of the company — once Asia’s largest commodity trader — is hanging in the balance as it attempts to push through a deal that would hand control to senior creditors, about half of whom back the approach. The plan is fraught with risk, and comes against a backdrop of turbulence at the trader. Last week, Noble Group defaulted on its debt, was hit by two lawsuits and saw founder Richard Elman quit the board amid a disagreement about the restructuring proposal.

“As matters stand, the company is currently in default on certain of its debt obligations,” it said. The support of senior creditors and banks is “dependent on a successful restructuring. In the absence of such support and a successful restructuring, the company would no longer be a going concern.”

Noble Group outlined three possible routes that the company may take in the months ahead, depending on the approvals that it manages to get from shareholders and creditors. Elman’s role in that process will likely be decisive as he remains the top shareholder with a stake of about 18 percent.

Under the so-called primary restructuring, which is backed by the board, senior creditors will take over the company under a debt-for-equity rescue, and existing shareholders will receive a much-reduced stake. This option will be followed if shareholders vote in favor. Under the so-called alternative restructuring, the board would seek to enter administration, and ask the administrator to follow the primary plan. This option will be followed should shareholders as a whole vote against the initial approach. In this scenario, the allocation of shares in a new company would be at the discretion of creditors, although consenting shareholders would get what was promised in the primary restructuring. The third path leads to liquidation. Noble Group said that support from senior creditors and banks depends on a successful restructuring, and without that, it would no longer be a going concern. In this case, the board would be required to seek insolvency protection.

As the crisis unfolded, Noble Group has followed a shrink-to-survive strategy, selling off assets to pay down debts, and retreating back to its Asian roots in coal trading. As Elman quit last week, he trimmed his stake in a small but symbolic move: the founder has sold shares only once previously in the company’s history, he testified in a court case last year.

“The board’s strong preference is for a consensual transaction among the various classes of the capital structure,” it said. “The preference arises because a consensual restructuring, via the primary restructuring, is likely to result in better returns to stakeholders as a whole than a non-consensual restructuring, via the alternative restructuring, or liquidation.”

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Bloomberg

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Following vacancies can be applied for (only in Singapore).   

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  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.