Noble Group Denies `Enriching' Claim as Rescue Plan Ignites Spat

(Bloomberg) -- Noble Group Ltd. responded to criticisms by one of its biggest shareholders about the embattled commodity trader’s conduct, and defended the debt rescue plan that’s set to hand management a bigger stake than equity investors.

Abu Dhabi-based Goldilocks Investment Co. wrote to the Singapore Exchange Ltd. this week requesting an investigation into Noble’s directors and management, according to a copy of the letter seen by Bloomberg. On Wednesday, Noble responded to those claims by saying its actions and public statements have been under “the regulatory microscope”, according to a statement to the Singapore bourse.

The complaint from Goldilocks highlights some of the challenges for Noble and creditors that have backed the rescue plan, which follows a three-year crisis marked by billions in losses, asset sales and controversial accounting. Noble’s in-principle deal proposes restructuring $3.5 billion in debt, potentially averting bankruptcy, by converting about half of the obligations into new equity.

That plan -- if approved -- will see all existing shareholders, including Goldilocks, cut to a 10 percent holding, while management of the new company gets as much as 20 percent. Goldilocks holds 8.1 percent of Noble Group’s stock, or 107.6 million shares. Singapore’s capital markets are regulated by the SGX, as well as the Monetary Authority of Singapore.

Goldilocks “believes that there are grounds for an investigation into Noble and its directors and management,” the group said in the 17-page letter, which was accompanied by copies of company filings and media articles. It added that the rescue plan “is alarming and perplexing because it envisages not only a massive dilution of Noble’s existing shareholders but this appears also to have been done in order to confer a benefit to management and employees.”

In its letter, Goldilocks drew attention to instances of alleged “potential market manipulation, negligent misstatements and minority oppression” by Noble. It also complained that it didn’t receive timely information on the proposed restructuring.

Below are details of some of the complaints listed in Goldilocks’ letter, and Noble’s response to them from its statement:

• Goldilocks said it “noted a pattern” in Noble’s announcements of potential investors resulting in share price gains; it raised concern management did not do enough to ensure accurate and complete information was disclosed and questioned if management or certain shareholders may have spread information to inflate the stock price artificially.
• In response, Noble said any announcements released by the company about strategic talks and investors were based entirely on fact. “The announcements deliberately did not name the parties in question so as to avoid misleading or unduly exciting public interest,” it said, adding it isn’t aware that any leaks came from the company.
• Goldilocks said Noble seemed to have entered into some undervalued transactions to dispose of assets. It also said it noted a pattern of inflating the initial sale price of an asset, which would subsequently be adjusted significantly downward upon completion.
• Noble said the board attempted to maximize value on all disposals. The reasons for the lower-than-expected consideration received could be explained by competitors taking advantage of Noble being a distressed seller, and working capital changes and operating losses in the business being sold, which led to adjustments, it said.
• On the restructuring plan, Goldilocks said questions remain as to “how and why management and employees negotiated for itself such benefits without any corresponding benefits to existing shareholders.”
• Noble responded that allegations the management are enriching themselves at the expense of shareholders are unfounded, and that management is essential to the company’s business.
• Goldilocks reiterated a request for representation on the Noble board.
• Noble said its nomination committee considered the request and wasn’t comfortable acceding to it for corporate governance reasons.

A spokesperson for SGX, who confirmed that it received the letter from Goldilocks, said it would “require the company to respond publicly to the allegations in the letter and if the allegations are substantiated, we will take the appropriate regulatory action.”

The spokesperson added: “As Noble Group’s proposal is subject to SGX’s approval, the exchange will consider in its review the compliance of the scheme with the Listing Rules and whether it is prejudicial to shareholder interest. In particular, SGX will ensure that the appropriate level of shareholder approval is sought to approve the scheme.”

Noble Group shares fluctuated on Wednesday after losing 12 percent the day before. The stock closed 8.7 percent higher at 25 Singapore cents after falling by the same amount.

To contact the reporters on this story: Jasmine Ng in Singapore at jng299@bloomberg.net, Andrea Tan in Singapore at atan17@bloomberg.net.

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Alexander Kwiatkowski

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