Richard Elman resigns from Noble's board amid shareholder suit

Singapore

NOBLE Group's founder and chairman emeritus Richard Elman has resigned from the board - after news broke that the company and several executives including Mr Elman are being sued by a substantial shareholder.

In an exchange filing on Wednesday morning, Noble said the 77-year-old stepped down from his role as non-executive director with effect from Tuesday. It did not provide any reasons.

Though Mr Elman remains the top shareholder with an 18.3 per cent stake, observers say his departure is not expected to affect Noble's restructuring efforts given that he has given up operational control of the group for nearly a year.

Goldilocks Investment Company - the plaintiff in the lawsuit accusing the defendants of inflating Noble's profits - hailed Mr Elman's resignation as a "new dawn" for the company.

"Despite lack of reasons, Mr Elman's resignation should be welcomed," it said in an emailed statement. "It presents an opportunity for a new board composition which would greater protect stakeholder interest and transparency."

The Abu Dhabi fund, which owns 8.1 per cent of Noble, had on Tuesday filed a lawsuit against the firm accusing it of inflating profits to raise money and justify extravagant remuneration packages.

Goldilocks added in its statement that a board consisting of a majority of independent directors may be the stepping stone towards a fairer restructuring scheme.

"Unlike what many have portrayed, Goldilocks has never been against the restructuring of Noble," it said. "Instead, it has consistently advocated for a better shareholders' value recognition instead of the continued payouts to the management team."

Goldilocks said it is also assessing a possible new management team, and will be proposing to replace the current one.

Market observers say Mr Elman's departure is unlikely to have any impact on the group's restructuring efforts.

"To my knowledge, Richard Elman has not been very actively involved in Noble's operations for some time now," said Brayan Lai, an analyst at credit research firm Bondcritic. "There should not be any key-man risks or provisions made to him."

Corporate governance advocate Mak Yuen Teen, an associate professor at the National University of Singapore, expects that there will be not much difference after Mr Elman's departure.

Mr Elman remains a substantial shareholder and has had a lot of influence in putting the current board and management in place, he said.

Mr Elman, who founded Noble in 1986, had retained a presence in the company even as he gradually gave up his leadership responsibilities over the years.

He stepped down as CEO at the end of 2009 and became non-executive chairman, though he struggled to hand over the reins - the group had five CEOs in seven years.

He eventually also stepped down as chairman when Paul Brough, a restructuring specialist who helped to liquidate Lehman Brothers, was appointed to the role last year. The position of chairman emeritus was then created for Mr Elman.

In a separate announcement on Wednesday, Noble said it intends to "vigorously resist" the lawsuit by Goldilocks.

The group confirmed in the evening that it had been served the writ of summons, which was filed against the firm and seven former and current executives.

"The company is in consultation with its legal advisers in this regard and intends to vigorously resist any and all allegations or claims against it," said Noble.

Goldilocks is seeking relief from Noble on behalf of shareholders, including US$169 million paid to the management, the difference between the consideration Noble received for some assets it sold and their net tangible asset value, and other costs and damages to be decided by the court.

It also wants a declaration that the defendants have breached their fiduciary duties to the company.

Senior commodities banker-turned-consultant Jean-Francois Lambert views the lawsuit as a last attempt from an "opportunistic shareholder to derail an already fragile restructuring process which is clearly not favourable to them".

"It is worth reminding that this large shareholder started to build its stake only last year, when Noble's difficulties and the market's concern were largely known and commented," he said.

The fresh troubles for Noble come as it said it will not make payment for the principal and interest due on its US$379 million bonds which matured on Tuesday. This prompted S&P ratings to further downgrade its rating on the firm to "D" from "CC".

Shares in Noble slipped 8 per cent or 0.9 cent to 10.4 Singapore cents on Wednesday.