Noble Group's long-suffering creditors and shareholders have been dealt a potentially killer blow after the Singapore authorities blocked the re-listing plans of the former commodities trading kingpin.
Pushed closer to the brink of liquidation, Noble said on Friday that it intended to pursue an alternative to its original $3.5 billion debt restructuring plan.
"In doing so, the Board, in discharging its fiduciary duties, may implement the Restructuring through a court-appointed officer," Noble said.
Although it remains unclear what shape this new restructuring will take, there is speculation that it might involve insolvency protection. Noble said as much in a circular dated August 10, in which it highlighted the alternatives of filing for administration in an English court or, failing that, liquidation.
The alternative restructuring plan does not guarantee Noble shareholders will receive shares in New Noble, said David Gerald, the founding president of the Securities Investors Association (Singapore), a local shareholder advocacy.
There may be risks in the alternative restructuring, as it may trigger clauses allowing some counterparties to walk away from supply contracts, he said: “We can only hope that it does not happen.”
In a joint statement on Thursday, the Commercial Affairs Department (CAD) of the Singapore Police Force, MAS and SGX Regco cited significant uncertainties about the financial position of New Noble, the newly listed company Noble was poised to regenerate as.
"It would be imprudent to allow the re-listing as investors will not be able to trade in New Noble’s shares on an informed basis,” the watchdogs said.
Understandably, Nirgunan Tiruchelvam, head of consumer-sector equity research at investment bank Exotix Capital, described the new developments as “a massive blow” to Noble's shareholders.
Noble’s largest shareholders are founder Richard Elman with an 18% stake, followed by the sovereign wealth fund China Investment Corporation and Abu Dhabi fund Goldilocks Investment.
Creditors of Noble are also now likely to get less than they previously expected as it will take longer for them to recover whatever they can of their money, a Singapore hedge fund manager told FinanceAsia on condition of anonymity.
“Noble was a non-transparent company that was very difficult to understand and analyse. We were short the stock off and on, and covered it because it was heavily shorted,” the hedge fund manager added.
Under the original restructuring plan, the “Ad Hoc Group”, which accounts for 46% of Noble’s senior debt, were set to own 70% of New Noble. The 10 members of the Ad Hoc Group include the Attestor Value Master Fund, Owl Creek Investments, Taconic Varde Partners Europe and York Capital Global Advisors.
“The Ad Hoc Group may be worse off [now] while the other senior creditors will be better off. The terms of the [original] restructuring were extremely favourable to the Ad Hoc Group and this may be challenged by an administrator,” Arnaud Vagner, director of Iceberg Research, told FinanceAsia.
The perpetual bondholders of Noble “have lost almost everything anyway. What they need is to retain their ability to sue. Money is not in Noble anymore; it's outside,” Vagner said.
Iceberg is the whistleblower website set up by Vagner, who was fired from Noble. Since Iceberg first published allegations of fraud against Noble in February 2015, the company’s market value has collapsed by more than 99% from $6 billion. Noble had denied Iceberg’s allegations.
“I’m sure the loan officers at these banks [that lent money to Noble] sure will have a lot of heat,” said the hedge fund manager who declined to be named.
Noble’s other creditors include Deutsche Bank and ING Group.
Singapore's Accounting and Corporate Regulatory Authority (ACRA) had sent a letter to the subsidiary Noble Resources International (NRI) that challenged some aspects of the latter’s accounting, Noble said on Friday.
ACRA expressed the view that NRI's split between current and non-current assets “is incorrect” and also questioned its derivative treatment of certain contracts and its treatment of overhead costs, Noble said, whilst asserting how NRI disagreed with ACRA’s position.
Tiruchelvam added that Noble’s actual debt issues had the potential to be worse than expected because the net asset value of New Noble was unclear.
Noble submitted simulated financial statements for New Noble after considering the potential non-compliance with accounting standards highlighted by ACRA, the joint statement by the CAD, MAS and SGX Regco said. The simulated statements show the NAV of New Noble at the end of 2017 could be downwardly adjusted by 40% and the NAV as of March 31 could be downwardly adjusted by 45%.
“There could be even further reductions in New Noble’s NAV arising from investigations by CAD and MAS,” the regulators warned.
“If there is a new restructuring, it has to be approved again. This will take time while the company's liquidity is at a critical position. What is certain is that in any scenario, Noble or "new Noble" is not financially viable,” Vagner said.