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Noble Group hit by lawsuit from top shareholder Goldilocks as default looms

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[SINGAPORE] Goldilocks Investment Co, a major shareholder of Noble Group Ltd, sued the company and executives, including founder Richard Elman, in the Singapore High Court, alleging the trader inflated profits to raise money, according to a copy of a filing just hours before Noble defaults.

The suit also alleges management paid themselves inflated salaries, and then tried a cover-up when the accounts came under increased scrutiny, according to a copy of the case filed by Morgan Lewis Stamford LLC and seen by Bloomberg. As well as Elman, the defendants include chief executive officer Will Randall, chairman Paul Brough, and chief financial officer Paul Jackaman.

Goldilocks is seeking relief from Hong Kong-based Noble Group on behalf of shareholders, including about US$169 million paid to executives between 2011 and 2017, as well as any interest and damages assessed by the court, according to the lawsuit.

The 72-page filing cites allegations made by long-time Noble Group critic Iceberg Research. Goldilocks also wants a declaration from the court that the defendants breached their fiduciary duties.

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External media representatives for Noble in Singapore and London couldn't immediately comment on the lawsuit.

Noble Group, once Asia's largest commodity trader, is teetering on the brink of collapse following a crisis that started three years ago when Iceberg began publishing critiques of the company's accounting.

Executives led by Mr Brough are now trying to push through a restructuring plan that'll hand control to a group of senior creditors. The company, which has posted billions in losses, has said it doesn't intend to pay a 2018 bond that falls due on Tuesday.

Some of the defendants "sanctioned aggressive revenue recognition and creative accounting policies in order to inflate the valuations of Noble's 'associate companies' and long-term commodity contracts," the lawsuit said. It added: "The objective of these overvaluations was to inflate Noble's revenue and balance sheet."

Goldilocks began building up its equity holding in Noble Group last year, plowing in funds even after the trader had faced criticism. In January, Goldilocks urged the Singapore regulator to probe the trader's actions, saying that there were grounds for an investigation into Noble, its directors and management. It has also been vocal in opposing the restructuring proposal.

The lawsuit from Goldilocks may be another significant hurdle for the restructuring process, which faces approvals from bondholders as well as shareholders. The company has outlined a tentative timetable that stretches through to late July for the planned overhaul.

In the lawsuit, Goldilocks said some of the defendants "relied on the inflated profits and balance sheet to raise capital through bond and right issues on the SGX and borrowing from financial institutions," according to the filing. The SGX refers to the Singapore exchange.

"We confirm that our client has commenced proceedings in the Singapore High Court," said Daniel Chia, a Morgan Lewis Stamford lawyer acting for Goldilocks.

The case is Goldilocks Investment Co vs Noble Group Ltd, S295/2018, Singapore High Court.