Commodity Titan Quits as Noble Group's Elman Goes Mid-Crisis

(Bloomberg) -- Noble Group Ltd.’s Richard Elman resigned as a non-executive director as the commodity trader he founded decades ago struggles to secure its survival, with his decision announced a day after the firm slid into default.

The departure of Elman, who remains the top shareholder, was given in a statement to the Singapore exchange on Wednesday. The move was effective on Tuesday, the same day that S&P Global Ratings cut Noble Group’s credit grade to a level signifying default after it failed to pay a bond.

“For investors, this could resemble a captain-abandoning-ship scenario” that hurts confidence, according to Jingyi Pan, a market strategist at IG Asia Pte. The bigger issue remains the survival of the company, and the more immediate concerns about the debt restructuring, Pan said in an email.

Noble Group, which was once Asia’s largest commodity trader, has been locked in a crisis for the past three years. After billions in losses, selling assets around the globe and parrying criticism of its accounts, Chairman Paul Brough is now racing to push through a restructuring that’ll hand control to creditors. Elman’s move means he won’t be on the board as the company’s fate is decided.

“The company has been attempting to fend off issue after issue in the past few weeks,” Oriano Lizza, a sales trader at CMC Markets Plc, said in an email. The resignation isn’t surprising, according to Lizza, coming on the heels of S&P’s downgrade, a lawsuit this week from top shareholder Goldilocks Investment Co., and stake sales by other equity holders.

The departure may be a case of “walking before being pushed,” according to Lizza. An effort to contact Elman through an external company representative in Singapore wasn’t successful.

Elman, 77, started the business in 1980s Hong Kong as a middleman supplying Chinese steelmakers, and turned it into a conglomerate operating assets the world over -- mines in Australia, sugar mills in Brazil, American fuel terminals -- before the crisis hit. The company was named after James Clavell’s 1981 novel “Noble House,” a fictional tale of a colossal trading enterprise.

On Tuesday, Elman was named among defendants in the lawsuit filed by Goldilocks in the Singapore High Court that alleges the trader inflated profits to raise money. In a statement on Wednesday, the company confirmed it had been served a writ of summons by Goldilocks and said it "intends to vigorously resist any and all allegations or claims made against it."

‘New Dawn’

A few hours after the resignation was announced, Goldilocks welcomed the move, describing it as potentially a “new dawn” for the company, while at the same time querying whether Elman is due any further compensation, and highlighting the implications for the makeup of the board.

With Elman’s decision, and David Eldon’s plan to leave at the next annual general meeting, “the composition of the remaining board is no longer in line with the principles laid in Singapore’s Code of Corporate Governance,” it said. “With the departures, the board will only be served by two independent directors.”

As Noble Group’s crisis has deepened, Elman has progressively stepped back from his role at the Hong Kong-based company, which posted a loss of almost $5 billion last year. Latterly, he has held the title of chairman-emeritus.

The statement indicated that there are no unresolved differences of opinion between Elman and the board on material matters.

Under the restructuring plan led by Brough, existing shareholders including Elman will see their holdings reduced. In revised terms announced earlier this month, equity holders could get a 15 percent stake in the revamped business. At present, Elman holds 18 percent.

After Elman’s resignation was announced, and as investors weighed the prospects for the trader’s survival, Noble Group shares dropped as much as 12 percent to 10 Singapore cents. The stock closed at 10.4 cents, valuing the company at about $105 million. At its peak, Noble Group had a market value of more than $10 billion.

To contact the reporters on this story: Jake Lloyd-Smith in Singapore at jlloydsmith@bloomberg.net, Krystal Chia in Singapore at kchia48@bloomberg.net.

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Jake Lloyd-Smith

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