What Noble founder's exit means for restructuring crunch

Will Richard Elman's departure herald a breakthrough in talks over Noble Group's contentious restructuring support agreement?

Richard Elman’s sudden departure from Noble Group on Wednesday may be the key to resolving disagreements over the company’s restructuring support agreement say investors.

In a statement to the Singapore Exchange, the group said the company’s founder was resigning as non-executive director and chairman emeritus with immediate effect.

Elman will, however, continue to maintain his 18.3% stake in the commodities trader, which is coming to the crunch point in its talks to garner enough creditor and shareholder support for a $3.5 billion restructuring deal.

One bond fund manager told FinanceAsia, “It suggests the move is about more than just Noble’s financial woes.”

In particular, the investor flagged the lawsuit filed one day earlier by equity investor, Goldilocks Investment Management. This is seeking damages and a clawback of $169 million of payments paid to a group of Noble executives between 2011 and 2017.

Abu Dhabi-based Goldilocks, which purchased an 8.1% stake in Noble last year, hailed the news.

“Despite lack of reasons, Mr. Elman’s resignation should be welcomed,” it said in a statement on Wednesday. “Noble failed to clarify whether Mr. Elman’s resignation entitles him to any further payments or severance.”

But it added that his departure presents an opportunity for a “new board composition, which would greater protect shareholder interest and transparency.”

The Hong Kong-based bond fund manager also told FinanceAsia that Noble essentially has two options.

“It can sweeten terms, or it can file for bankruptcy,” the investor argued. “Over the past three years, Noble has reduced its reputation to zero.”

And its share price continues to head in that direction too, falling a further 7.96% on Wednesday to close at S$0.10. It has now almost halved in the space of a single trading week thanks to selling pressure from some of the group’s major investors (Orbis and Prudential), which have been trying to reduce their stakes.

Creditors and shareholders remain locked in battle over the group’s latest restructuring proposal.

This would give the company’s senior creditors 70% of the company if they agree to convert their debt into equity and provide a $600 million trade facility, plus $100 million in hedging facilities. The management and existing shareholders will each own the remaining 15%.

Elman, a former British scrap metal trader, founded Noble in Hong Kong in 1986 before listing it in Singapore in 1997. The 77-year stepped down as CEO in 2009 and became non-executive chairman.

Having run through five CEO’s, Elman ceded his own role to restructuring expert Paul Brough, who joined the company in 2016. 

 

¬ Haymarket Media Limited. All rights reserved.