An employee walks past a signage of Noble Resources, a Noble Group subsidiary, at their premises in Singapore. REUTERS/Edgar Su/File Photo
An employee walks past a signage of Noble Resources, a Noble Group subsidiary, at their premises in Singapore. REUTERS/Edgar Su/File Photo

Embattled commodity trader Noble Group reached a deal with dissident shareholder Goldilocks Investment over its planned $3.5bn debt restructuring, agreeing to boost the holding in the new company that stock investors stand to get. The shares surged.

Existing shareholders will now receive 20% of the revised company, up from 15%, according to an exchange statement on Wednesday. In addition, the two parties will drop all claims against each other, with Noble Group paying Goldilocks as much as $5m to cover its legal costs.

The deal marks a breakthrough after months of increasingly bitter public sparring between Noble Group and Goldilocks, and helps pave the way for a restructuring that will see control handed to senior creditors. Goldilocks has given its irrevocable support to the revised agreement, which already has the backing of founder Richard Elman.

Noble and Goldilocks will form a partnership to explore opportunities in the Middle East, according to the statement.

"This absolutely clears the biggest hurdle to the debt restructuring," said Stan Manoukian, founder of Independent Credit Research. "The threat of liquidation is no longer on the agenda. If Goldilocks had not played ball, the value of equity would be zero in a liquidation scenario. We expect the bonds to be worth more than where they are trading now."

To bring the complex deal to fruition, chairman Paul Brough needs approval from shareholders as well as senior creditors, of which about 85% back the plan. The company is working on a circular to send to the stock holders, before a special general meeting for a vote.

Getting sweeter

The restructuring agreement has been altered before. Earlier in 2018, Noble Group sweetened the deal for shareholders by revising the original plan, offering them the 15% holding, up from 10%. Under the latest deal, Goldilocks will also get to nominate a director to the board.

Noble Group shares surged as much as 57% to 8.5 Singapore cents and traded at 8c. Still, the stock remains 60% lower in 2018. On credit markets, defaulted notes due in 2020 fell 0.2c on the dollar to 40.9c, while its 2018 securities dropped 1.4c to 39.1c, according to prices compiled by Bloomberg.

In a separate statement, Noble Group said Pinpoint Asset Management and Value Partners, holders of its perpetual securities, withdrew a lawsuit filed against the company on June 13. Perpetuals have been offered $25m worth of new bonds in exchange for securities with a face value of $400m. On Wednesday, the perpetuals rose 0.6c, the most in a week, to 7.8c.

‘Final stages’

"By reaching agreement with Goldilocks, the company is now able to move into the final stages of its restructuring," Brough said. "The strategic partnership agreement announced today will create real opportunities for New Noble in the Middle East."

The remaining equity in the new company is being split between senior creditors and management. Under the latest deal, senior creditors stand to receive 70% of the trader, while management’s share will be 10%.

Goldilocks had urged an investor revolt against Noble Group’s original deal, arguing that it was unfair to existing holders. In April, it filed a lawsuit in Singapore’s High Court seeking to halt the restructuring. It also successfully sought an injunction to block Noble Group from holding its annual general meeting, with the gathering opened and then adjourned.

Years of crisis

Noble Group has been in crisis for years after billions in losses, defaulting on its debt, and allegations of improper accounting, which it has rejected. After a string of asset sales, the company has been reduced to a rump business focused on Asia, plus a handful of other assets including an alumina refinery.

Iceberg Research, the group that first published critiques of Noble’s accounting in 2015, offered a fresh jab on Wednesday, saying that "20% of zero is still worth zero", according to a statement on Twitter. It flagged "other obstacles to the restructuring", without giving details.

"Obstacles to the completion of the restructuring are probably getting removed," said Neel Gopalakrishnan, senior credit strategist at DBS Group Holdings. "But the key question is still whether, post restructuring, the company will be able to turn around operations for creditors to recover value."

With Andrea Tan