Noble Group shareholders face wipeout in sweeping refinancing

When a little-known research firm questioned a trading giant’s finances in 2015, few could have expected such a devastating unravelling of its fortunes.
Noble Group, which once dominated trade in Asia of oil, gas and metals, has announced a sweeping restructuring plan that will all but wipe out the holdings of its existing shareholders.
The deal, designed to keep the commodity trader alive, will convert roughly half its debt - $1.7bn (?1.2bn) - into equity. Its biggest creditors, including Varde Partners, Och-Ziff, Davidson Kempner and Taconic Capital, take a 70pc stake in the firm, which will set up a new top company.
Existing shareholders - including its 77-year-old founder Richard Elman - will end up with just 10pc, with the rest being held by senior management to “incentivise” them.
Holders of Noble’s perpetual bonds will also lose almost all their capital, with the creditors proposing to swap their $400m in bonds for a payment of just $15m.
The slimmed-down Noble will focus on shipments of thermal coal, liquid natural gas and dry bulk freight in Asia, after it sold off its North American energy business and liquid oil trading arm to raise much-needed cash.
Noble Group shareholders face wipeout in sweeping refinancing

Noble had ambitions of competing with Glencore and Vitol in oil trading
Singapore-listed Noble said the deal meant its “core” trading business would have debt of no more than $685m, while its creditors had also advanced trade financing of $700m over three years to keep it afloat.
Paul Brough, a restructuring specialist who joined as chairman in May, said the “arduous process” of hammering out the deal met his objective of “avoiding any form of insolvency proceeding”.
Noble shares have collapsed by 96pc since February 2015, when a research group named Iceberg published its first report suggesting the company could be a “repeat of Enron”, the US energy business that went bankrupt in 2001.
Iceberg’s chief claim was that Noble hid losses incurred by its associate companies to “avoid large impairments and fabricate profits” - charges the commodity trader’s management consistently denied.
Noble Group shareholders face wipeout in sweeping refinancing

The new Noble Group will be a much smaller affair
Iceberg’s research triggered renewed scrutiny of Noble by investors and credit ratings agencies, sending the shares into a spiral; this coincided with a sharp decline in global commodity prices. The stricken trader resorted to asset sales while urgently seeking a major new investor to inject capital.
Noble’s undoing marks the end of an era for a company that once had ambitions of competing with Glencore and Vitol for dominance of the global commodities trade.
The group was founded by British trader Richard Elman in Hong Kong in 1987. Mr Elman, who got his start in a scrap metal yard at the age of 15, stepped down as chairman last year but retained an 18pc stake prior to the debt restructuring announced today.
So the perpertual bondholders get wiped out but management that created Asia's Enron gets 20% of company? Good luck to get this approved!— Iceberg Research (@IcebergResear) January 29, 2018
The group’s former chief executive Yusuf Alireza, who left in 2016, filed a $58m suit against Mr Elman for alleged contract breaches last year.
The restructuring plan must go to Noble shareholders and creditors for a vote, but Iceberg was quick sound its disapproval of the scheme. “So the perpetual bondholders get wiped out but management that created Asia's Enron gets 20pc of company? Good luck to get this approved!” the firm said on Twitter.
In a longer note published on Saturday before the details of the deal were clear, Iceberg urged creditors to reject the deal, saying Noble’s management was attempting to stave off liquidation.
“Liquidation would mean that for the first time specialists from outside the company would have access to internal documents, emails, correspondence with the auditor, etc. Noble’s secrets will inevitably rise to the surface and make litigation for fraud even easier,” the company wrote.
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