'I was cheated': Tales from the collapse of commodity giant Noble Group

Noble has shredded billions in value since 2015 as the once US$12-billion company was reduced to a rump by untenable debt, losses and allegations it deceived investors with accounting tricks. PHOTO: BLOOMBERG

SINGAPORE (BLOOMBERG) - Francis Tay feels cheated.

The former Singapore civil servant says he's lost almost $50,000 in the implosion of Noble Group Ltd, the commodity trading giant. He also says shareholders like him have been let down by regulators whose job it is to protect them from the sort of crisis that's brought the company to the brink.

Yet, the 71-year-old says he still plans to vote in favor of a debt-for-equity restructuring at a shareholder meeting in Singapore on Monday (Aug 27) that will hand control to senior creditors, diluting existing stockholders. He sees no other option. Chairman Paul Brough paints the deal as do-or-die, and it already has the backing of the biggest investors, including founder Richard Elman.

"I was cheated of my hard-earned savings," said Tay, who still owns a small amount of shares. "How can a giant company collapse?" he said in an interview earlier this month in the run-up to the shareholder vote, adding: "What message does that send to the world about Singapore's reputation?"

Tay and other retail investors have been among the hardest hit, although institutional investors as well as buyers of the company's bonds when they were issued have also seen steep losses. Noble Group has shredded billions in value since 2015 as the once US$12-billion company was reduced to a rump by untenable debt, losses and allegations it deceived investors with accounting tricks. The Singapore-listed trader, which has always defended the integrity of its accounts, didn't respond to a request for comment.


As Noble's troubles mounted, the role of Singapore's regulators has come under scrutiny. In addition to running the exchange, Singapore Exchange has front-line oversight and responsibility for maintaining fair, orderly and transparent markets as well as following up with companies to investigate allegations of irregularities. It's backed by the Monetary Authority of Singapore, the de facto central bank of a city state that's also a global financial center with a hard-earned reputation for probity.

In the case of Noble Group, allegations have come thick and fast, led by Iceberg Research, which says profits were inflated. The group - whose claims are rejected by Noble - is led by Arnaud Vagner, a former credit analyst at Noble in Hong Kong, where the trader was based before it moved to London, who recently dropped his self-imposed cloak of anonymity.


"The SGX is a policeman without a gun," said Tay. "Layman investors like us only have access to on-the-surface information, such as company releases or news reports."

The SGX defended itself by setting out a summary of the actions it's taken over the past three years as Noble suffered blow after blow. The tally includes frequent contact with the company, queries for more detail on its results and its demand that Noble appoint an independent financial adviser to assess the debt-for-equity plan that Tay and others are about to vote on.

"Questions ought to be asked about whether the SGX board has adequately prioritized investor protection," said Mak Yuen Teen, an associate professor of accounting who specializes in corporate governance at the National University of Singapore Business School. There are also questions on whether the board has given sufficient resources to SGX RegCo, he says, referring to the arm of the SGX that discharges its regulatory functions.


After Iceberg's first report, "we required the issuer to appoint a Singapore auditor to do an independent review, and took a series of actions to ensure the issuer's auditor addressed the issues of concern in every single year-end audit since FY2015," an SGX spokesperson said.

"Notwithstanding that both the audits and review were clean, we continue to do our part to investigate matters that are within our remit. We are committed to holding issuers and professionals responsible for their actions and opinions. If there is any evidence of wrongdoing, we will refer it to the appropriate authorities."

The SGX spokesperson added: "In terms of whether our resources are adequate, we are accountable to both the SGX RegCo board and the MAS."

It's the second time that a major trading company based in the city state has run into trouble. Olam International Ltd, one of the world's largest food commodities traders, came under attack from Muddy Waters in 2012. The short-seller raised doubts about its finances, compared it to failed energy trader Enron and it said ran a high-risk of failure. The trader dismissed the claims but after a rout in its shares, Temasek Holdings, the state-owned Singaporean investment fund, eventually took a controlling stake in 2014.


Noble's case posed challenges for local regulators as the company is incorporated in Bermuda, according to Mak. That means "many of the core corporate governance requirements relating to director duties and shareholder rights in the Singapore Companies Act would not apply," he said. As the saga has unfolded, Noble has always parried the claims made by Iceberg and consistently defended its actions.

"MAS will thoroughly investigate potential breaches of the law that have been referred to us by SGX, should SGX's investigations uncover breaches of the law," an MAS spokesperson said. "MAS will not hesitate to take appropriate enforcement action if our own investigations uncover any violations of our regulations."

Other investors have been bruised too. "The hole is too big, they need a strong injection of money," said S Nallakaruppan, who works in the finance industry and counts himself as fortunate that he sold most, but not all, of his Noble Group shares in 2016. Like Tay, he plans to vote in favor of the restructuring.

At the special general meeting, shareholders will vote on the plan, which hands 70 per cent of the equity in a revamped company to senior creditors, 10 per cent to management and the rest to existing shareholders, with about half of the debt written off. Brough has said that, should the proposal founder, the company may be forced to enter administration or file for bankruptcy. Hours before the meeting, the trader asked that its shares be suspended from trade.

Lisa Ng, an administrative manager in the finance sector, says she lost about 90 per cent of her investment in Noble, or at least $5,000. She says she won't attend the SGM because she considers her shares a write-off. Selling them would cost her more in fees than what she'd now recover, she said.

"I do wish that I had gotten out when Iceberg had come out with its critique of Noble's accounting," the 61-year-old said. "I thought that Noble, being a blue-chip share, wouldn't be like what they claimed."

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