Noble Group seeks to sweeten disputed debt deal after backlash

Noble is seeking to mollify opponents to its survival plan as it teeters on the brink of collapse after then-unknown Iceberg Research began publishing critiques of its accounting three years ago.
Noble is seeking to mollify opponents to its survival plan as it teeters on the brink of collapse after then-unknown Iceberg Research began publishing critiques of its accounting three years ago.PHOTO: REUTERS

HONG KONG (BLOOMBERG) - Noble Group moved to sweeten the terms of a debt restructuring deal for some of the investors that had threatened to scupper the embattled commodity trader's last-gasp bid for survival.

As the company races to reach an agreement before a make-or-break bond maturity on March 20, it said in a statement on Wednesday (March 14) that it revised the terms for existing shareholders and some junior creditors whose holdings are being all but wiped out by the reorganization proposed in January. Some had threatened to vote against the plan or take legal action against their treatment and what they said was a too-generous deal for management.

Noble is seeking to mollify opponents to its survival plan as it teeters on the brink of collapse in a saga that started three years ago when then-unknown Iceberg Research began publishing critiques of its accounting. Since then, the company has been battered by losses and its stock driven to near two-decade lows.

"Noble has increased the share option given to shareholders, which will come from management," said Brayan Lai, a Singapore-based analyst at credit research firm Bondcritic Ltd. "This sweetened deal seems to be driven by the pushback from existing shareholders."

Under the new terms, existing shareholders could get 15 per cent of equity, up from 10 per cent offered in January, while management's potential share drops to 15 per cent, from 20 per cent. Additionally, both shareholders and management could share a further 5 per cent of new common equity in the form of an incentive share option. The perpetuals - holders of bonds with no maturity - could receive as much as US$25 million in new bonds, compared with the US$15 million cash they were offered in January's plan.

PERPETUAL BONDS

"For the perpetual bondholders, it's unclear if they are getting a better deal," Lai said. "They are being given a new perpetual bond where dividends can be deferred and if it was up to me, I might just elect to take the previous cash offer."

While it remains to be seen whether the new terms are enough to appease opponents, Noble is gradually winning more support from senior creditors. It has signed a binding restructuring support agreement with creditors holding 46 per cent of its senior debt. Deutsche Bank has also signed up to the plan, while ING Bank is in the process of acceding to it. Together the lenders own 4 per cent of the senior claims, it said.

The ad hoc group is in talks with another batch of creditors holding about 15 per cent of its senior claims, who have indicated their broad support for the plan, the filing said. When the plan is put to vote, it requires support from 75 per cent of those present.

"This isn't a particularly large increase in participation towards the RSA given how much time they've spent on it," said Alex Turnbull, Singapore-based managing partner at Keshik Capital Pte. "There is still a very good chance for a hard default when the 2018 bonds come due on March 20. This gap of required votes is not closing fast enough given coming maturities."

Noble's 2018 notes rose about 1 cent on the dollar to 50.6 cents as of 12:29pm Hong Kong time, according to Bloomberg-compiled prices. Its 2022 notes climbed 1.5 cents to 50.5 cents, while the perpetual notes lost 0.6 cent to 8.4 cents. Shares in the company jumped as much as 18.7 per cent as they resumed trading in Singapore after a halt pending the announcement.