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Noble Group surges as Abu Dhabi fund emerges as top holder

Friday, June 23, 2017 - 16:31

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Noble Group Ltd, the commodity trader that's struggling for survival, has a new substantial shareholder after an Abu Dhabi fund built up a 5 per cent stake over two days. The stock rallied in Singapore.

[LONDON] Noble Group Ltd, the commodity trader that's struggling for survival, has a new substantial shareholder after an Abu Dhabi fund built up a 5 per cent stake over two days. The stock rallied in Singapore.

Goldilocks Investment Co added 50.5 million shares on June 20, after buying 15.5 million shares the day before, according to a filing to the Singapore Exchange late on Thursday. Goldilocks now has a holding of 5.03 per cent.

The investment comes as Hong Kong-based Noble Group searches for a strategic investor to restore confidence after a collapse in its shares and bonds, and follows an agreement with core banks to extend a key credit facility. Goldilocks is controlled by investor Jassim Alseddiqi's Abu Dhabi Financial Group, which didn't respond to requests for comment. It started the US$200 million fund last year, saying that it would target undervalued opportunities in the six Gulf Cooperation Council countries.

"Goldilocks's involvement, together with the recent extension of Noble's credit facility, provides some encouragement that it can achieve a meaningful restructure," Ric Spooner, chief market analyst at CMC Markets in Sydney, said by email. "However, conservative investors are likely to need evidence of a more significant deal on equity partnership or asset sales."

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Noble Group has rallied this week after the company agreed to extend by 120 days the US$2 billion credit facility that had been due to mature, paring its slump since the start of the year. On Friday, the stock surged as much as 21 per cent to 55 Singapore cents, and traded at that level at 2:28pm.

At Thursday's closing price, Goldilocks's stake was worth about S$30 million. The fund built its holding in the opening two days of the week, with the stock rallying 46 per cent on Monday, aided by the agreement to extend the credit facility, and a further 6.3 per cent on Tuesday.

Mr Alseddiqi's Abu Dhabi Financial, with assets under management of US$5 billion, has a history of buying stakes in listed companies. In past years, it acquired holdings in Bahrain-based GFH Financial Group, Dubai-based Gulf Navigation Holding PJSC and the brokerage arm of Abu Dhabi-based First Gulf Bank PJSC.

"Goldilocks Investment is reported to have a track record of buying financially troubled companies," said Jingyi Pan, a Singapore-based market strategist at IG Asia Pte Ltd. "While their increase in stake could go to building confidence in the shorter term, the extent of this impact may be limited," Mr Pan said, adding that some of this week's share price gains may have been driven by short-covering, or investors closing out bearish bets.

Short interest in Noble Group totalled about 11 per cent of its free float as of Wednesday, according to Markit Group Ltd data tracked by Bloomberg. That compares with a high this year of 13.7 per cent hit on May 19.

Noble Group remains under pressure after several turbulent years marked by losses, credit-rating downgrades, and accusations of improper accounting that it has denied. Led by new chairman Paul Brough, a restructuring specialist, it's hired Morgan Stanley and Moelis & Co to review its options.

An external media representative for Noble Group declined to comment on Friday.

Separately on Thursday, Noble Group said it received US$1 from selling a 45 per cent stake in PT Borneo Sejahtera Mulya, which provides coal logistics services in Indonesia. The joint venture had a book value and net tangible asset value of zero in Noble Group's financial statements for the period ended May 31, according to an exchange filing.

"We see this as a small positive for the company given that it shows an investor has willingness to build up stake in the company despite its troubles," Citigroup Inc said in a note, referring to Goldilocks. "But we doubt if this does anything meaningful to alleviate the current issues faced by the company."

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