Noble Group's week from hell gets worse as huge lawsuit hits

[SINGAPORE] Singapore-listed Noble Group's week of woe just got worse as the commodity trader, which has defaulted on its debt and seen founder Richard Elman quit the board, said that it's being sued by an Indonesian coal producer for more than a quarter of a billion dollars.

The Hong Kong-based trader "has become aware" that PT Atlas Resources has filed a lawsuit in Indonesia against the company seeking compensation of more than US$260 million, it said in a statement on Friday.

"The company is not aware of the grounds for the claim or any further details relating to the same. Nonetheless, the company intends to vigorously defend any claim if served."

Once Asia's largest commodity trader, Noble Group has faced a mounting crisis over the past three years as it lost billions of dollars, parried criticism of its accounts and sold assets in a bid to survive. Chairman Paul Brough is now racing to push through a restructuring, which will hand control to creditors. The case from PT Atlas highlights the mounting risks to that complex plan.

"One by one, a lot of guys may be trying to have a go at this sort of punch at the company," Brayan Lai, an analyst at credit research firm Bondcritic Ltd, said by phone. "All of these will certainly complicate the whole process."

On Thursday, Noble Group said that it's possible, though unlikely, bondholders could force it into liquidation, although it argued that any attempt by creditors to wind it up after the default would likely fail. That followed a blow on Tuesday, when major shareholder Goldilocks Investment Co sued the company. Elman's resignation as a non-executive director was announced midweek.

SHRINK-TO-SURVIVE

Noble Group's shrink-to-survive strategy has seen the company sell off businesses worldwide, scaling back to its Asian roots with a rump business focused on coal trading. Atlas's 2016 annual report says it has a "longstanding agreement with Noble Resources, a prominent global marketing agent."

PT Atlas's case, which was registered in the Central Jakarta court on March 19, is against Noble Group, Chief executive officer William Randall, as well as Noble Resources International Pte, related to sales of PT Alhasanie, PT Borneo Minerals and PT Sumber Daya Kumala, the Indonesian company said in an exchange statement dated March 21. PT Alhasanie and PT Borneo Minerals are Atlas units, while PT Sumber Daya Kumala is no longer a unit, it said.

As Noble Group's crisis has escalated, the company's market value in Singapore has plummeted to less than US$100 million, with some major shareholders trimming stakes this week, including Prudential Plc. Under Mr Brough's debt-for-equity restructuring plan it's proposed that senior creditors will take the largest stake in a new company, diluting existing holders.

"The initiation of legal actions against Noble this week further complicates Noble's restructuring," said Neel Gopalakrishnan, senior credit strategist at DBS Group Holdings. "For bondholders, the key is still whether the company would be able to turn around its core businesses, which would ultimately determine how much they recover."

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