Cost of Noble's restructuring is likely to top US$100m

[LONDON] The cost of Noble Group's restructuring is likely to top US$100 million, another financial burden for the cash-strapped commodities trader that has defaulted on its bonds.

The estimated price tag for advisers and other expenses, based on disclosures in regulatory filings, is approaching the company's entire market value of US$114 million as Noble pays fees to the company's creditors and foots much of the bill for the 11 law firms, investment banks and public relations consultants working on the restructuring.

Despite having defaulted on its debt this week, Noble has agreed to pay some of the multi-million dollar fees by today as part of a binding deal with a group of senior creditors.

The company declined to comment.

In the deal, published last week, Noble agreed that it was now "responsible for paying all costs and expenses" incurred by the ad-hoc committee of creditors, which includes hedge funds such as Och Ziff Capital Management LLC and Davidson Kempner Capital Management LLC, plus the two banks supporting the deal - Deutsche Bank AG and ING Bank NV.

In addition, the trader will also pay the costs and expenses incurred by its own senior management negotiating their own deal within the restructuring.

TRADE FINANCE

According to the agreement, Noble has to pay a chunk of the fees by today. On March 14 it agreed to "pay all outstanding invoices" incurred by the advisers working on behalf of its senior creditors and banks providing trade finance "within five business days."

Noble hasn't disclosed the total amount in fees covered by the agreement and a spokesperson declined to comment. All the company has said is that its "restructuring costs and expenses" would be "in-line" with the "business separation and disposal costs and expenses" it incurred last year.

Noble declined to say how much it spent on those items in 2017.

The advisers' fees come on top of several other payments that Noble has publicly disclosed in its debt-restructuring deal.

First, the trader has agreed to pay the members of the ad-hoc creditors committee the equivalent to 2 per cent of the face value of the debt they hold, with a cap on US$2 billion in debt, to compensate them for their work on the restructuring, according to a regulatory filling in January.

Based on the company's latest disclosure that the ad-hoc group holds 46 per cent of its debt, that bill would equal US$31.7 million. If the creditors increase their debt holdings to the cap, the bill would rise to US$40 million.

CREDIT LINES

Second, Noble has also agreed to pay ING a total of US$15 million in fees for signing the restructuring deal and for not withdrawing an existing credit line. (As of last week's announcement, ING hadn't yet signed the restructuring agreement.)

And thirdly, Deutsche Bank and other senior creditors will receive up to US$35 million for providing another credit line that will keep the company running after the restructuring.

The total sum comprising fees and expenses publicly disclosed is now in excess of US$80 million, and could reach US$90 million, making it likely that the total bill for the restructuring will come in around US$100 million or more.

That calculation doesn't include any retention bonuses that Noble Group has paid to senior staff to avoid mass walk-outs during the debt restructuring talks.

Last year, Noble paid US$20 million to its senior energy traders to keep them working for a few extra months while it was trying to sell its oil trading unit, the company said in a regulatory filling last week.

The advisers involved in the restructuring deal include Moelis & Co, PJT Partners, Comprador, Houlihan Lokey and Rothschild & Cie, according to regulatory filings. Law firms on the deal include Kirkland & Ellis LLP, Akin, Gump, Strauss, Hauer & Feld LLP, Allen & Overy LLP, Clifford Chance LLP, and White & Case LLP. The public relations firm RLM Finsbury LLC is also advising the company on its debt restructuring.

BLOOMBERG