Noble’s perpetual bondholders fight back

A group of investors present a counterproposal to improve their standing in the embattled commodity trader’s distressed debt exchange.

Investors holding one of the shortest straws in Noble Group’s proposed distressed debt exchange fought back on Monday with a counterproposal they hope will improve the terms being offered to them.

Perpetual bond holders and a number of equity investors led by Abu Dhabi’s Goldilocks have been bitterly opposed to an in-principle deal Noble agreed at the end of January with an opposing group of senior creditors led by Varde Partners, Och-Ziff Capital and Taconic Capital.

Under the original proposal, Noble would reduce its $3.4 billion senior debt to $1.7 billion in return for giving senior creditors 70% equity ownership of the restructured group and 90%, or $180 million, in preference shares. It also included a committed $700 million three-year trade finance facility fronted by ING Groep NV.

Analysts estimated that senior creditors would receive about 50 cents on the dollar for their existing bonds and even more if they were able to participate in the trade finance facility. As of Monday, about 36% of senior creditors had agreed, with a further 15% close to agreement.

However, holders of the Singapore-listed group’s $400 million perpetual bonds would only receive 3.75 cents on the dollar for their bonds. Equity investors would also be diluted to just 10% of the company, with management retaining the remaining 20%.

So on Monday, investors representing 25% of the perpetual bondholders proposed a competing $700 million trade finance facility. This has a one-year longer tenor (four years) and “considerably lower” financing costs than the deal hammered out with the senior creditors according to a statement.

The facility would be underwritten by some of Noble’s trading counterparties and the perp group, which is being led by two Hong Kong-based fund management firms: Pinpoint Asset Management and Value Partners. In return, the group wants fairer treatment in the debt exchange.

One source familiar with Pinpoint’s thinking told FinanceAsia, “This latest proposal will significantly reduce Noble’s interest expenses relative to its projected Ebitda.”

The exact interest savings Noble might make remain unclear. But its bond complex rose about one point as the market welcomed news that the perpetual bondholders are willing to negotiate with the company.

Prior to this, market participants knew the perp holders never had enough of a majority to block the original restructuring proposal, but they might have gone to court instead. Such a move would not only prolong the restructuring process, but might also hammer the final nail into Noble’s coffin as well.

“Investors are receptive to any proposal that provides more visibility,” one bond trader told FinanceAsia.

In order to secure any agreement, Noble needs assent from 75% of investors (by value) who are present and able to vote at any meeting to finalise a restructuring. The Singapore Stock Exchange has also told the company to appoint an independent advisor to vet any proposed restructuring.

However, time is running out. Noble has entered a 30-day grace period after missing a $32.8 million coupon payment on a $750 million 8.75% 2022 bond, which fell due last Friday.

“We’re closely watching how the situation evolves over the coming weeks,” said one Singapore-based bond investor. “Everyone’s focus has now turned to a $379 million bond, which matures on March 20. This bond doesn’t have a grace period.”

If perp holders are able to negotiate slightly better terms and the restructuring is passed, Noble Group will gain a valuable working capital lifeline. It will help it to stumble on.

However, as analysts have been pointing out, its long-term future remains open to question.

“The fundamental picture remains very vulnerable,” UBS recently wrote. “In our view, ongoing cash outlays and a negatively capitalized balance sheet may continue to impair the company’s ability to achieve a meaningful turnaround.”

In 2017, Noble reported a $4.9 billion net loss and has been shedding assets to try and meet its short-term financing and re-payment needs. On Monday, it was at it again, sealing the sale of a dry bulk carrier vessel to Bianca Corporation and Primerose Shipping for $24 million in cash.


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