Liquidation not only option to Noble's restructuring and management should not get 'free equity', says Goldilocks

Noble Group had said that its restructuring is fair and equitable to shareholders on the basis that senior creditors are the economic owners of Noble.
Noble Group had said that its restructuring is fair and equitable to shareholders on the basis that senior creditors are the economic owners of Noble. PHOTO: REUTERS

SINGAPORE - Goldilocks Investment Company, a major shareholder of Noble Group, on Thursday (March 29) issued another statement highlighting "serious inaccuracies and deficiencies" of Noble's response to the Singapore bourse regarding its restructuring support agreement (RSA).

Chief of these include Goldilocks' belief that liquidation is not the only alternative to the RSA plan, and that Noble's board has not provided any substantive justification as to why its existing management deserves "free equity, along with a full release from liability".

In a March 26 announcement, Noble had said that its restructuring is fair and equitable to shareholders on the basis that senior creditors are the economic owners of Noble, Goldilocks noted.

This means that the board takes the position that its shareholders are "out of money", Goldilocks said.

Concurrently, the embattled commodities trader is saying that it is able to continue as a going concern until such time as the restructuring is completed, and the fund manager is contesting that these positions are not consistent.

According to Goldilocks, it is inappropriate for the board to use Noble's liquidation value as a basis to prematurely conclude that senior creditors are the sole economic owners of Noble.

The investment firm added that Noble's intent in doing so is twofold - to threaten and oppress shareholders; and to push through the RSA that has been negotiated with a small number of creditors.

Contrary to what Noble's board is claiming, alternatives to restructuring contemplated under the RSA are not limited to liquidation, Goldilocks said. "White knight and refinancing proposals have been put forward to the board, and the board has rejected them, without providing any details or reasons."

In addition, Goldilocks is also contending that Noble's board has failed to provide any meaningful response as to why its existing management, whose stewardship led to net losses of US$4.9 billion in fiscal year 2017 should be entitled to receive a 10 per cent equity of the New Noble post-restructuring.

Goldilocks also noted that the board has not explained why Noble's management should be entitled to receive "a cashless, interest-free loan" from senior creditors to subscribe for an option for a further 10 per cent of the ordinary share capital of New Noble.

Among other issues, Goldilocks pointed out that Noble's board has not provided adequate justification that an administration process in England would be better than judicial management in Singapore.

In particular, Noble has not offered details including the "costs, process duration, and certainty of outcomes" that make an administration order in the UK preferable, especially since Singapore already has a highly developed and flexible restructuring regime that is a world leader in innovation, Goldilocks said.

The fund manager added that Noble has side-stepped the point that although its 2018, 2020 and 2022 notes are governed either by English law or New York law, all three notes are listed and quoted in Singapore, where Noble has more real and tangible connections.