The winners and losers of Noble’s debt restructuring deal

(Jan 30): Noble Group Ltd has finally reached a deal to restructure US$3.5 billion in debt, saving the beleaguered commodity trader from bankruptcy.

The in-principle agreement will convert half of its debt — about US$1.7 billion — into new equity, the company said on Monday. While the plan still needs approval from all parties, Chairman Paul Brough, who had pledged from the beginning to avoid insolvency, heralded the birth of a “new Noble.”

But at what cost? Below is a run down of the likely winners and losers from the proposed deal.

Winners: Hedge FundsCreditors, including hedge funds Varde Partners, Och-Ziff Capital Management LLC, Davidson Kempner Capital Management LLC and Taconic Capital Advisors, will get 70 percent of the company. The funds that negotiated the deal will also receive a payment of 2 percent of the face value of the debt they hold "in consideration for their work" on the restructuring. And they’ll pocket a 5 percent fee for underwriting a new US$700 million trade finance facility.Losers: Perpetual BondholdersAll creditors aren’t created equal. Holders of Noble’s perpetual bonds, which rank below other debt securities, will lose almost all their capital, suffering a 96.5 percent loss in face value. That’s because the company has proposed converting US$400 million worth of perpetuals into a maximum of US$15 million. Noble’s perpetual bond plunged 43 percent to a record low of 7.8 cents on the dollar on Monday after the deal was announced, before rebounding slightly on Tuesday.Losers: ShareholdersThey’re close to being wiped out as their stake is reduced to 10 percent. Noble’s stock has plummeted to about US$260 million in value and the debt-for-equity swap will dilute holdings further. China Investment Corp, the country’s sovereign wealth fund that owns 9.5 percent, will end up with less than 1 percent. Abu Dhabi-based Goldilocks Investment Co, which has built up an 8.1 percent stake since June, will also suffer — as will an army of smaller investors who had already seen their holdings collapse over the past three years. Shares dropped 13 percent in Singapore on Tuesday.

Losers: Richard ElmanFor the man who built Noble from scratch into a US$10-billion trading powerhouse, it’s a disaster. Besides witnessing the collapse and dismemberment of his life’s work, his 18 percent shareholding, through Noble Holdings Ltd, would becomes just 1.8 percent.

Winners: ManagementThe current management get 20 percent under the agreement. That’s been described as “unusually high” by Independent Credit Research founder Stan Manoukian, while Brayan Lai, a credit analyst in Singapore at Bondcritic, said he expected some push-back against the proposal. Iceberg Research, the anonymous group whose criticisms of the company’s accounting sparked the collapse three years ago, reacted in a tweet that while "perpetual bondholders get wiped out" the "management that created Asia’s Enron gets 20% of the company."