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Noble refutes Goldilocks claims, says management is essential to business

SINGAPORE - Noble Group rubbished the notion that its management is enriching itself at the expense of shareholders, calling these "unfounded" allegations.

Responding to shareholders' unhappiness that Noble Group's management appeared to have focused more on their own interests, the commodity trader said on Wednesday that its management is essential to the company's business because its core businesses are heavily reliant on its people.

Its shares, which opened at 22 Singapore cents, received a boost from the afternoon announcement, and ended the day at 25 cents, up 8.7 per cent from its previous close.

Noble said the group of creditors represented at the restructuring negotiations had agreed to give the management an initial 10 per cent stake in the restructured entity in order to retain them and align their interests with the future success of the company. "Any further grants will be subject to performance hurdles, will not vest if those hurdles are not achieved, and will be funded by loans from creditors that will need to be repaid before vesting."

Under the restructuring plan Noble unveiled on Monday evening, the new company that will hold all of its businesses, and assets will ultimately be 70 per cent owned by senior creditors, 20 per cent by the management and 10 per cent by existing shareholders.

The in-princple agreement Noble reached with 30 per cent of its creditors proposes to halve its debts of US$3.5 billion by asking them to take on equity and new debt instruments.

The outsized equity stake that the firm's management will have in the restructured entity raised some eyebrows, and led to at least one major shareholder, Goldilocks Investment Company, questioning whether the management has breached its fiduciary duty to the company and its shareholders.

Goldilocks, which owns 8.1 per cent of Noble, has sent a letter to Singapore regulators asking them to investigate the company on this and other matters.

These include whether the firm timed its announcements of strategic investors to boost its share price ahead of capital raising exercises, and whether its asset disposals have been conducted in a proper manner.

Noble said in response that many of its announcements were required by listing rules to address leaks, market rumours and media articles. "The board is not aware that any of those leaks have come from the company or its management."

The board has also tried to maximise the value from all asset disposals during this period, Noble said.

The firm explained that the consideration received was typically less than expected as competitors took advantage of Noble being a distressed seller; working capital and operating losses also led to subsequent adjustments, and these factors had been disclosed when seeking shareholders' approval.

Goldilocks, which is based in Abu Dhabi, had purchased its shares in Noble in the secondary market unsolicited, and without any consultation or engagement with the company, Noble said. Goldilocks acquired its interest in Noble through two market transactions in July last year.

While the initial private engagements with the fund had been "very encouraging", Goldilocks made it a pre-condition for them to be granted two seats at the board before any detailed talks over potential restructuring or investment options, according to the announcement.

"The board's nomination committee met to consider this request and was not comfortable acceding to this request, for corporate governance reasons. This was carefully explained to Goldilocks."

Noble said it nevertheless continued to engage with Goldilocks and gave detailed briefings to the shareholder regarding the restructuring. Goldilocks had complained it did not receive timely information on the proposed restructuring.

Noble added it will issue a more detailed announcement in due course. The Singapore Exchange had said it will require the company to respond publicly to the allegations in Goldilocks' letter, and that it will take the appropriate regulatory action if the allegations are substantiated.

An external spokesman for Goldilocks told BT it will respond at a later date.

Meanwhile, prices for Noble's bonds due in 2018, 2020 and 2022 have converged, while its perpetual securities have fallen on a larger than expected write-off in its value, noted Bondcritic credit analyst Brayan Lai.

He expects "further negotiation and pushback" from other creditors as they digest the details of the restructuring proposal. "The company is not out of the woods yet but in the least it can sight some light," he wrote in a note on Tuesday.

TSMP joint managing partner Thio Shen Yi sees Noble's proposal as a "potentially workable plan" which requires sacrifice from most stakeholders.

"I think it makes an attempt to balance the interests of stakeholders, and it is probably in everyone's interests that Noble emerges from this as a sustainable going concern," he said. But whether the balance is properly struck is debatable, and the various parties are still at liberty to object, he added. "There are obviously competing interests and practical realities to consider, and the devil is often in the details."

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