The Latest Twist in Its Epic Collapse Is Noble Group’s Second Restructure in Three Years

Krystal Chia

19 Dec 2021, 03:51 PM IST

(Bloomberg) -- The epic downfall of what was once Asia’s largest commodity trader took another turn, with Noble Group Holdings Ltd. laying out plans for its second restructuring in three years.

The company said Friday it had reached an in-principle agreement with creditors and will reorganize the ownership of some assets after its debt reached an “unsustainable” level. The process will see its debt fall to about $500 million from about $1.5 billion now.

Formerly a behemoth of Asia’s commodity trading landscape, with a market value of more than $10 billion, Noble has collapsed into a shell of its former self amid accusations of improper accounting -- which the company denies -- and billions of dollars in losses. The trader undertook a multibillion-dollar debt restructuring in 2018 which converted much of its debt to equity and handed control to a group of hedge fund creditors led by Taconic Capital Advisors.

The latest restructuring is expected to be completed by March 31. Bloomberg News previously reported the plan.

The Latest Twist in Its Epic Collapse Is Noble Group’s Second Restructure in Three Years

A cloud has hung over Noble for the past three years amid a probe by a trio of Singaporean authorities into whether the company made false accounting declarations. The investigation -- announced in late 2018 and just days before its previous reorganization was due to be completed -- saw the city-state refuse to have the new entity relist.

A company spokesman on Friday confirmed that the Singaporean probe was ongoing.

The fresh reorganization will see Noble’s so-called TradingCo cease to be a part of the parent and form a new “segregated” business, it said. An interest payment on the trading arm’s 2023 notes that was due Monday will be deferred to Jan. 25. The company will make further announcements about the 2022 notes that mature on June 20.

Noble also said it will exit freight and liquefied natural gas. A presentation released alongside the announcement underlined the company’s shrinking ambitions, outlining plans for the trading group to concentrate on energy and raw materials in Asia, be lower risk and focus on returns. Previously Noble had highlighted its role as diversified, risk-seeking and growth-focused.

The company has already implemented organizational changes and isn’t planning further headcount reductions in 2022, the spokesman said.

Other takeaways from the announcement:
The company plans to significantly reduce selling, administrative, and operating expenses. It will focus on cash leakage, including onerous leases, advisory costs and litigation. Will selectively use derivatives. Paper markets will be primarily used to hedge risk and create short-term positions where physical positioning isn’t possible. The company will focus on resolving legacy issues including non-core disposals, litigation, regulatory investigations, and closing some units. Noble said its AssetCo, which includes the Jamalco business, has sufficient liquidity to meet current needs with $81 million in cash as of Dec. 13.

Other takeaways from the announcement:

The company plans to significantly reduce selling, administrative, and operating expenses. It will focus on cash leakage, including onerous leases, advisory costs and litigation.
Will selectively use derivatives. Paper markets will be primarily used to hedge risk and create short-term positions where physical positioning isn’t possible.
The company will focus on resolving legacy issues including non-core disposals, litigation, regulatory investigations, and closing some units.
Noble said its AssetCo, which includes the Jamalco business, has sufficient liquidity to meet current needs with $81 million in cash as of Dec. 13.

Friday’s announcement comes as the company struggles to turn a profit, with Noble reporting a $72 million loss in the nine months ended Sept. 30. One of its key assets, an alumina refinery in Jamaica, was seriously damaged by a fire in August and isn’t due to restart production until the middle of 2022.

The company has also seen the departure of a series of executives, including former chairman James Dubow last week.