Embattled commodity trader Noble Group won over a major opponent of its US$3.5 billion (S$4.8 billion) debt-for-equity restructuring plan, ending months of accusations and lawsuits. Its shares rallied more than 50 per cent.
Existing shareholders will get 20 per cent of a restructured company, up from 15 per cent, according to a statement from Noble Group, which said previous critic Goldilocks Investment Company was a supporter of the revised deal and the two would cease fighting each other in the courts.
Hours later, long-time foe Iceberg Research renewed its criticism, saying the trader has no value.
The deal with Goldilocks, which may also nominate a director to the board, marks a breakthrough after months of bitter public sparring and will pave the way for a restructuring that will hand control to senior creditors.
Goldilocks has given its irrevocable support to the revised agreement, which already has the backing of Noble Group's founder Richard Elman. Noble Group and Goldilocks will form a partnership to explore opportunities in the Middle East, according to the statement.
"This absolutely clears the biggest hurdle to the debt restructuring," said Mr Stan Manoukian, founder of California-based Independent Credit Research. "The threat of liquidation is no longer on the agenda. If Goldilocks had not played ball, the value of equity would be zero in a liquidation scenario. We expect the bonds to be worth more than where they are trading now."
Noble Group shares surged as much as 67 per cent before ending at 8.8 cents, up 63 per cent.
Still, the stock remains 56 per cent lower this year. On credit markets, defaulted notes due 2020 fell 0.2 cent on the US dollar to 40.9 US cents, according to prices compiled by Bloomberg.
Goldilocks had urged an investor revolt against Noble Group's original deal, arguing it was unfair to existing holders. In April, it filed a lawsuit in Singapore seeking to halt the restructuring. It also successfully sought an injunction to block Noble Group from holding its annual general meeting, with the gathering opened and then adjourned. It holds 8.1 per cent of the trader.
Noble Group has been in crisis for years after billions in losses, defaulting on its debt and allegations of improper accounting, which it has rejected. After a string of asset sales, the company has been reduced to a rump business focused on Asia, plus a handful of other assets including an alumina refinery.
Iceberg, the group that first published critiques of Noble Group's accounting in 2015, pushed back yesterday, saying that "20 per cent of zero is still worth zero", according to a statement on Twitter. It flagged "other obstacles to the restructuring", without giving details.
To bring the complex deal to fruition, Noble Group chairman Paul Brough needs approval from shareholders as well as senior creditors, of which about 85 per cent back the plan. The company is working on a circular to send to stockholders before a special general meeting for a vote.
The restructuring agreement has been altered before. Earlier this year, Noble Group sweetened the deal for shareholders by revising the original plan, offering them the 15 per cent holding, up from 10 per cent.
The remaining equity in the new company is being split between senior creditors and management. Under the latest deal, senior creditors stand to receive 70 per cent of the trader, while management's share will be 10 per cent.
In a separate statement, Noble Group said Pinpoint Asset Management and Value Partners, holders of its perpetual securities, withdrew a lawsuit filed against the company on June 13.
Perpetuals have been offered US$25 million of new bonds in exchange for securities with a face value of US$400 million. Yesterday, the perpetuals rose 1.3 US cents, the most in a week, to 8.4 US cents.
"Obstacles to the completion of the restructuring are probably getting removed," said Mr Neel Gopalakrishnan, senior credit strategist at DBS Group Holdings.
"But the key question is still whether post-restructuring, the company will be able to turn around operations for creditors to recover value."