Noble says 'very difficult' for noteholders to wind it up, following first bond default

A Noble Group sign pictured at a meet-the-investors event in Singapore.
A Noble Group sign pictured at a meet-the-investors event in Singapore. PHOTO: REUTERS

SINGAPORE - Noble Group said noteholders who do not support its restructuring plans are likely to find it very difficult to successfully wind up the company, the commodity trader said in an exchange filing on Thursday afternoon (March 22).

The company also said it will likely be able to continue as a going concern, as there are reasonable grounds to expect its restructuring to be successfully implemented.

This comes after Noble said earlier on Thursday that it has received notice of default from the trustee of its US$379 million 3.625 per cent bonds.

The company also temporarily halted trading of its shares on the Singapore Exchange.

The company announced last Friday that it will not be paying the principal and interest on these bonds which had been due on March 20, nor the coupon due on its 2020 notes that it has already missed.

The embattled commodity trader said that the terms of its restructuring support agreement (RSA) with creditors provide for a standstill, which means creditors who have signed or acceded to the deal will refrain from taking any action against the company with respect to their claims.

Noble has received support from holders of 50 per cent of the company's existing senior claims, which include claims in respect of its 2018 notes, 2022 notes, 6.75 per cent notes due 2020 and the company's revolving credit facility.

However, it is not clear how much of the 2018 bond this group holds.

The company said in an exchange filing on Thursday that it expects more creditors to come on board the RSA, giving further support to the standstill in respect of its senior debts.

While 2018 noteholders who have not signed the RSA could try to take action against the company, it would be very difficult to successfully wind up the company, which is the only realistic remedy available to such a holder, Noble said.

Holders of the 2018 notes would need to request the trustee in writing to institute proceedings against the company, but the trustee would first need to be indemnified, secured or pre-funded to its satisfaction.

No noteholder may proceed directly against the company unless the trustee, having become bound to so proceed, fails to do so within a reasonable period of time, Noble noted in its exchange filing.

Given the support for the RSA, and the time and cost associated with pre-funding the trustee, "the board considers that the likelihood of a group of 2018 noteholders successfully organising winding up process in respect of the company to be low".

Even if the trustee or 2018 noteholders were able to take action against the company to sue for the amount owed under the 2018 notes, or to more likely to attempt to wind up the company, the relevant court would likely adjourn or stay any such proceedings until the restructuring has been carried out.

Once the restructuring becomes effective, those creditors will no longer have claims against the company in respect of existing debts - regardless of whether or not they supported the restructuring.

These latest developments follows a tumultuous week for Noble. The company's founder, non-executive director and chairman emeritus Richard Elman, 77, resigned from the board with immediate effect on Wednesday - after news broke that the company and several executives including Mr Elman are being sued by a substantial shareholder.

Major shareholder Goldilocks Investment is accusing Noble of inflating profits to raise money. The commodity trader has said that it "believes the allegations in the lawsuit... to be unfounded and intends to vigorously resist them if served".

In a statement on Thursday, Goldilocks Investment said it is committed to working with all stakeholders - including creditors - "to achieve a restructuring plan which is equitable".

"Goldilocks has been approached by other stakeholders, and is open to working with all who share in the common purpose of negotiating a fair and re-modelled restructuring plan that restores and preserves value for all parties involved."