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Shareholder sues Noble and execs, accuses them of inflating profits

Trader defaults on notes due March 20; fund managers of Orbis and Prudential sell down stakes

S&P Global Ratings on Tuesday lowered Noble's long-term issuer credit rating and long-term issue rating and its outstanding senior unsecured notes to "D" from "CC".


TROUBLED commodity trader Noble Group suffered fresh blows on Tuesday, as a major shareholder filed a lawsuit in Singapore accusing it of inflating profits to raise money.

The Hong Kong-based trader was also forced to undergo a ratings downgrade by S&P Global Ratings the same day.

Noble and its executives, including founder Richard Elman, have reportedly been sued in Singapore by one of the company's major shareholders, Goldilocks Investment Co.

According to a Bloomberg report, which cited documents filed in Singapore's High Court, Goldilocks is accusing the defendants of relying "on the inflated profits and balance sheet to raise capital through bond and right issues on the SGX (Singapore Exchange) and borrowing from financial institutions".

The Business Times understands the lawsuit has been filed against the company and seven former and current executives. In addition to Mr Elman, defendants named in the suit include CEO Will Randall, chairman Paul Brough, and chief financial officer Paul Jackaman.

The 72-page filings claim that Noble's management paid themselves inflated salaries, and then tried a cover-up when the accounts came under increased scrutiny, Bloomberg's report said. It added that Goldilocks is seeking relief from Noble on behalf of shareholders, which includes some US$169 million (S$223 million) paid to executives between 2011 and 2017, and interest and damages assessed by the court.

Goldilocks also reportedly wants a declaration from the court that the defendants breached their fiduciary duties.

"We confirm that our client has commenced proceedings in the Singapore High Court," Daniel Chia, a Morgan Lewis Stamford lawyer acting for Goldilocks, told Bloomberg.When contacted by BT, media representatives for Noble were not able to comment on the lawsuit by press time.

Goldilocks had in January urged the SGX to probe the Hong Kong-based commodity trader's actions, saying that there were grounds for an investigation into Noble, its directors and management.

Noble had issued an announcement that month to say that "allegations that management are enriching themselves at the expense of shareholders are unfounded".

News of the Goldilocks lawsuit is just the latest development in a closely followed debacle that began in 2015 when then-unknown Iceberg Research started publishing critiques of Noble's accounting. The commodity trader has since been battered by trading losses and massive writedowns.

The company on Tuesday also underwent a ratings downgrade; S&P Global Ratings lowered its long-term issuer credit rating and long-term issue rating on Noble and its outstanding senior unsecured notes to "D" from "CC", after Noble said it will miss the principal and coupon payments on two of its outstanding US dollar notes.

"We lowered the ratings because Noble has missed the principal and coupon payment for its 2018 notes due March 20, 2018. Noble also missed the coupon payment on its 2022 notes due March 9, 2018.

"In addition, the company said it would not make the payments despite being given 30-day grace periods to meet both obligations. The failure to make these payments will trigger cross-defaults on the company's other obligations," S&P Global Ratings said.

It added that it does not expect Noble to meet any of its outstanding obligations as the company preserves its assets during the debt restructuring process the company is currently undergoing.

Noble had announced last week that it has opted for non-payment of its obligations to preserve assets "for the benefit of all stakeholders during the implementation of the proposed restructuring". The restructuring exercise is expected to be completed by the end of July.

"We will conduct another review of the company's credit profile after the restructuring is complete," the ratings agency added.

After plunging almost 20 per cent on Monday, Noble's shares recovered some ground on Tuesday, to close 0.2 cent higher at S$0.113.

In related news, filings with the SGX on Monday showed that fund managers of Orbis and Prudential sold some 42 million Noble shares worth S$5.5 million on the open market from March 14 to 19.

On March 14, Prudential and its subsidiaries sold about 3.36 million shares at 16.9 Singapore cents apiece for a total consideration of S$566,000. This transaction pared Prudential's stake in Noble from 135 million shares, or 10.1 per cent of the firm, to 131 million shares, or 9.9 per cent.

On March 16, Orbis Allan Gray, Allan & Gill Gray Foundation, Orbis Holdings, and Orbis Investment Management sold 15 million shares worth S$2.1 million at 13.8 Singapore cents apiece. This was followed by another share disposal on March 19 where 12.5 million shares were sold for S$1.4 million, or 11.5 Singapore cents per share, reducing the group's stake further to 8 per cent, or 106 million shares.

Separately, Orbis Investment Management (Hong Kong) has also trimmed its stake in Noble from 9 per cent to 7.4 per cent via two market transactions.

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