Noble relisting is off; assets found to be potentially inflated

Singapore

THE relisting of commodity-trader Noble Group will not proceed on Dec 11 as targeted, with the authorities' investigations having discovered that the to-be-relisted New Noble's net asset value (NAV) could be half of what has been reported.

With this, Noble may have to look to administration in the UK as an alternative restructuring route.

The Monetary Authority of Singapore (MAS) and Singapore Exchange Regulation (SGX Regco), in a joint statement with the Singapore Police Force on Thursday evening, announced that they have decided to bar Noble Group from transferring its listing status to New Noble under the company's proposed restructuring.

MAS and SGX RegCo pointed out that there are significant uncertainties about the financial position of New Noble: "It would be imprudent to allow the relisting, as investors will not be able to trade in New Noble's shares on an informed basis."

The authorities said this follows a careful review of the findings from the ongoing investigations into Noble and its wholly-owned unit, Noble Resources International (NRI) by the Accounting and Corporate Regulatory Authority (Acra), the Commercial Affairs Department (CAD) and MAS.

Acra, in a letter to NRI dated Nov 20, highlighted the points of potential non-compliance with accounting standards. Noble then submitted to SGX RegCo a set of simulated financial statements to illustrate the effect on New Noble's financial statements after taking into account the issues raised by Acra.

The simulated financial statements showed that New Noble's NAV of US$872.4 million as at Dec 31, 2017 could be about 40 per cent lower, and that the NAV as at March 31, 2018 could be 45 per cent lower.

These adjustments would be in addition to the write-downs of more than US$2 billion already made by Noble in FY 2017.

The statement said: "There could be even further reductions in New Noble's NAV arising from investigations by CAD and MAS that extend beyond the potential non-compliances with accounting standards highlighted by Acra.

"CAD and MAS are looking into other relevant areas in connection with the preparation and disclosure of Noble's financial statements, including the valuation of commodity contracts and other related assets. The findings arising from these investigations could potentially lead to a further erosion of New Noble's NAV."

With this development, it is unclear when - and if at all - New Noble could be relisted, a move borne out of a massive US$3.5 billion debt revamp which would have been the company's primary restructuring.

Under this restructuring, there would be a debt-for-equity swop that will leave existing shareholders owning only 20 per cent of a new, revamped company; the remaining 70 per cent would go to senior creditors and 10 per cent, to the management.

The company, in its restructuring circular dated Aug 10, has provided an "alternative restructuring" route should relisting not pan out.

Under this alternative restructuring, the company would file for administration in Britain. The creditors would then take control of the company, with shareholders and perpetual bond holders likely to be wiped out.

If neither the relisting nor alternative restructuring is implemented, the likely outcome for Noble would be liquidation.

Corporate governance advocate Mak Yuen Teen of the National University of Singapore Business School supports the authorities' decision to stop Noble's relisting from proceeding, given the circumstances of its assets facing possible further write-downs.

He told The Business Times: "It's the correct decision, given that it's clear that the non-compliance with accounting standards will have a significant impact on the NAV of New Noble, and there's further uncertainty related to other areas being investigated.

"If a company is listed and something as material as this happens, the stock would be suspended. So it is right that it should not be allowed to relist now."

Noble's earliest and most persistent critic Arnaud Vagner said that had Singapore regulators acted earlier, they could have avoided this "major scandal".

Global law firm Gibson Dunn & Crutcher's Singapore-based partner Robson Lee said Thursday's joint statement appears to convey that Noble's financial statements in the past few years have not been proper and do not reflect a true and fair view of its financial position, despite the clean-audit opinions it has received over the relevant years.

"This is a most unfortunate revelation to the market, just when the group is expected by all and sundry to have a new lease of life... I believe it is always better late than never in such an instance, when the financial and business integrity of the business to be transferred to New Noble cannot be ascertained. The decision of the authorities to stop the re-listing of New Noble is correct, as it will prevent further losses by investors who intend to trade on the shares of New Noble."

He wondered if Noble can survive this "black hole" phase. It is unknown when the investigations would end, but it is clear this would not be soon.

The authorities' decision to bar the relisting is not open to appeal, though a judicial review - in which the court is asked to examine the decisions of public bodies - is possible.

The authorities had announced late last month that they had started an unprecedented tripartite probe into the beleaguered Noble for suspected breaches of securities laws and accounting practices, among other issues. The probe had then thrown a spanner in the works for New Noble's relisting, scheduled for Nov 27. Noble then postponed the relisting to a date no later than Dec 11.