Noble Group shareholders back rescue plan as Brough to exit

Image courtesy of Noble Group

(Bloomberg) — Noble Group Ltd.’s shareholders have endured years of torment as a default, billions in losses, and allegations of improper accounting pushed the commodity trader to the brink. After a 90-minute meeting Monday, they backed the company’s bid to salvage itself.

The $3.5 billion debt-for-equity restructuring, which will hand control to senior creditors, was approved by 99.96 percent of votes cast at a special general meeting in Singapore, according to figures from the company. Before the session, the trader had said about a third of its shareholders, including founder Richard Elman, were already committed to the rescue.

The vote will enable Noble — which has consistently rejected criticism of its accounts — to press on with the deal’s final stages. The plan to create a “New Noble” had been the subject of a heated dispute between Chairman Paul Brough and shareholder Goldilocks Investment Co. before its terms were amended and the two forged an agreement after facing off in court. The trader still faces opposition from foe Iceberg Research, which wants to halt the deal.

The plan to create a “New Noble”.

“We are now moving into the final phase of the restructuring,” Brough told investors before the vote. The board has fulfilled a commitment to avoid insolvency, said the restructuring specialist, who previously worked on the liquidation of Lehman Brothers’ assets in Asia. In the case of insolvency at Noble, there’d be “no proceeds left for shareholders, big or small,” he said.

‘Near-death’ experience

The restructuring had been arduous and expensive, according to Brough, who said while the trader has good prospects now, it came close to collapse. Last summer, there was a “near-death” experience when Brough thought the company was just a phone call away from insolvency, he said.

Under the plan endorsed by shareholders, 70 percent of the equity in a new company will go to senior creditors, 10 percent to management, and the remainder will be held by existing stockholders. The debt burden will be halved. To survive the crisis, the company has sold off assets in a retreat to its Asian roots that leaves it focused on coal, liquefied natural gas and freight.

The debt burden will be halved.

There are more steps to come before the deal is effective including a formal green light from creditors, and approval from the courts for the revamp. The first of those appears to be a given as Noble has said more than 86 percent of senior creditors already back the rescue. At the SGM, Brough said should the vote pass, the restructuring should be complete in two to three months.

Critic Iceberg Research, led by former Noble employee Arnaud Vagner, is planning to press on with its fight. Vagner is trying to organize a fresh legal challenge to the restructuring, and said last week the effort was making “good progress.” On Monday, Iceberg said: “A few law firms are working on these actions at the moment and we will make announcements soon.”

In the run-up to the SGM, the trader said top shareholder Elman won’t take up his position as an executive director in the new company for personal reasons.

Noble Group shares were suspended on Monday. They last traded at 14.9 Singapore cents, and have declined more than 60 percent over the past 12 months, cutting the trader’s market value to $145 million. At its height, Noble Group’s capitalization was almost $12 billion.

At the SGM, Brough signaled he’ll be moving on, and reaffirmed that plan in comments to reporters. “Once this restructuring is completed, we need a chairman with deep industry knowledge,” he said in response to a shareholder’s question. The company expects to announce a new chairman before the restructuring is completed, and the successful candidate will likely come from outside, he said.

It didn’t all go Noble’s way on Monday. In an annual general meeting that followed the SGM, shareholders voted against a resolution that would allow directors to award shares to management under one of the company’s performance plans. While it’s unlikely to have a major impact on the company, the vote highlights investors’ dissatisfaction with management remuneration, which has been a bone of contention throughout the restructuring process.

(By Krystal Chia)