Noble shareholders back crucial rescue plan but challenges still abound

Singapore

AS early as by November this year, troubled "old" Noble Group could make way for a revamped New Noble after the positive outcome of a special general meeting on Monday which saw shareholders overwhelmingly vote in favour of the commodity trader's do-or-die US$3.5 billion debt rescue plan.

"It's obviously a relief to get this out today. (But) This is not our destination - it's just a milestone and there's still a lot of work to do to get the scheme approved," said chairman Paul Brough after the meeting for shareholders to vote on the proposed debt restructuring that lasted for just over an hour and a half and was attended by 222 registered shareholders.

The positive outcome is the latest step in the transformation of Noble that will be premised on an asset-light and Asian-centric business model and will be 70 per cent owned by senior creditors, 10 per cent by management and the rest held by existing shareholders.

Some 99.96 per cent of the shares held by those present in the meeting voted in favour of the debt-for-equity restructuring versus only a simple majority of voters that the ailing company actually needed to push through its controversial debt revamp. But the show of support is probably because many Noble investors are nursing painful losses - the company's market value has dwindled from some US$6 billion in February 2015 to US$150 million at its last traded price before it was halted on Monday pending the outcome of the meetings - and felt they had no other option.

"It's between the devil and the deep blue sea. We didn't have a choice... we have to salvage what we can," said one retiree who has been an investor in Noble for 10 years.

Governance advocate Professor Mak Yuen Teen of NUS Business School said: "The outcome is totally expected. The alternatives facing them were liquidation where they will get nothing. Here, they see themselves getting 'hope'."

Mr Brough told shareholders that Noble's restructuring has been "arduous and protracted" and even "hazardous" and the company had faced several "near-death experiences" and was on the brink of insolvency prior to the debt revamp scheme which would have left shareholders with nothing.

"By contrast the proposed restructuring offers value to shareholders and offers New Noble a sustainable capital structure to deliver long-term value to all stakeholders," he said.

Not everyone is convinced. "I think New Noble will continue to have a difficult relationship with the market," said Prof Mak.

At the meeting, a whitewash resolution required for independent shareholders to waive their right to receive a mandatory general offer from the senior creditors' group who will own 70 per cent of New Noble shares also pulled through.

Noble's staunchest critic Iceberg Research wasted no time and issued a note even as the meeting was ongoing. "Even if the vote is positive - which is expected - this will not stop securities holders from suing the individuals and organisations responsible," said the research outfit.

When asked by a shareholder if New Noble would face any risk, chiefly legal risks arising from Iceberg's action to call on disgruntled shareholders of Noble to sue the firm for their losses, Mr Brough replied: "The short answer is - no".

This, he explained, was because the New Noble will be a distinct legal entity from its predecessor and hence, will have a "clean start".

The outcome of the shareholders' meeting was largely deemed a shoo-in as Noble had earlier secured irrevocable undertakings from shareholders owning some 30 per cent including from founder Richard Elman and 8.1 per cent owner Goldilocks Investment Company.

The scheme has also received the commitment from 86 per cent of existing note creditors and existing revolving credit facility (RCF) lenders.

Noble's restructuring plan has drawn vociferous attacks since its details were first laid bare earlier in the year, not least because it hasn't imbued hope that the team leading the troubled trader's turnaround is viewed as essentially the same team that critics say is responsible for the company's collapse.

Looking ahead, Noble's biggest challenge, said Mr Brough, is to "get back to business" as the group enters its final phase of restructuring and ensuring it secures competitive trade finance facilities.

In a few months' time however, that may no longer be Mr Brough's headache as the turnaround specialist told shareholders that New Noble will have a new chairman.

He said: "I have a particular set of skills for stressful situations that have been tested to the limits with this project.

"But once the restructuring is completed, we need a chairman with deep industry knowledge to complete the business turnaround as this is a very complicated industry and risks are inevitable."