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Abu Dhabi, UAETuesday 11 December 2018

Noble comes in for scathing criticism over $3.5bn restructure approval

Michael Dee, former director at Singapore state investment firm Temasek, says funds backing revamp will exit 'left, right and centre' in short order

Noble Group is still having a difficult time amid further losses. Reuters
Noble Group is still having a difficult time amid further losses. Reuters

Noble Group’s foes aren’t going away. Less that 24 hours after the commodity trader won shareholder approval for its $3.5 billion debt-for-equity deal, long-standing critic Michael Dee said the revamped company will struggle to recover and shouldn’t be allowed to list shares in Singapore.

“I really don’t believe that we’re going to be in any different situation,” Mr Dee, a former senior managing director at Singapore state investment firm Temasek, said on Tuesday. “The interest rate on the debt is way too high for a commodity trader,” he said.

Noble Group took a major step toward restructuring on Monday as shareholders backed the deal, paving the way for the trader to seek approval from senior creditors, as well as from courts in England and Bermuda for schemes of arrangement. Along with Iceberg Research, Mr Dee has been one of the company’s most vocal adversaries as it lost billions, defaulted and faced criticism of its accounts, which it has rejected. He has also been critical of Singapore’s regulators, who have stood by their actions as the crisis unfolded.

The hedge funds backing the restructuring are “going to exit stage left, right, front and centre, top and bottom: they’re not long-term holders, they’re making a trade”, Mr Dee said. “What will happen after this is that there’ll be a lot of hype, a lot of people will come out and try to push the line that this is going to be a new Noble, very successful, that it is going to go back up to its great grandeur and glory. It’s not.”

A spokesperson for Noble Group declined to comment on the remarks from Mr Dee, who is also a former regional chief executive at Morgan Stanley.

Under the plan, 70 per cent of the equity in a revamped company will go to creditors, 10 per cent to management and the rest to shareholders, while the debt burden will be halved. On Tuesday, Noble Group’s shares initially rallied, then traded little changed, while its 2018 bonds rose to a five-month high

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“I have to call a spade a spade,” Mr Dee said on the regulators’ role overseeing Noble Group. “This has been a complete catastrophic meltdown.”

In the city-state, Singapore Exchange has front-line responsibility for maintaining fair, orderly and transparent markets, backed by up the de facto central bank, the Monetary Authority of Singapore. Both have defended their roles as Noble Group imploded, most recently in remarks in response to comments from retail investors who have lost money.

As Noble’s troubles mounted, SGX said it has had frequent contact with the company, queried it for more detail on results and requested that Noble appoint an independent financial adviser to assess the debt-for-equity plan. A spokesperson has said the exchange is committed to holding issuers and professionals responsible for their actions and opinions, and if there is any evidence of wrongdoing, it will be referred to the appropriate authorities.

More than 86 percent of senior creditors back the rescue, and chairman Paul Brough told the shareholder meeting the restructuring should be complete in two to three months. Mr Brough said it is critical the restructuring be wrapped up “as soon as possible” to enable the group to operate with a sustainable capital structure and to capitalise on opportunities in Asia.

Noble also faces opposition from Iceberg Research, the group that first published critiques of the accounting in 2015, claiming profits were overstated. Led by former employee Arnaud Vagner, Iceberg is now trying to organise a fresh legal challenge to the restructuring. Mr Dee said he has no relationship with Iceberg, with the two arriving at similar findings independently.

Noble Group has consistently rejected Iceberg’s claims, and it is pursuing a lawsuit against Mr Vagner. At the shareholder meeting, chief financial officer Paul Jackaman said the company was ready to defend itself vigorously against potential legal challenges.

“There should be a full, forensic accounting done to determine: ‘Am I right, or is the company right? Is Iceberg right, or is the management right?’” Mr Dee said. “Let’s find out, let’s actually do that with somebody who’s truly independent.”