Noble files HK suit after third Iceberg report
It acts against ex-Noble credit analyst and a firm which registered Iceberg site
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It acts against ex-Noble credit analyst and a firm which registered Iceberg site
Kenneth Lim
24 March 2015
Noble Group has thrown a legal punch back at the parties that it says have been waging a month-long campaign to accuse the commodities trading company of aggressive accounting.
Noble shares rallied 4 per cent, or 3.5 Singapore cents, to close at 91 Singapore cents on Monday. The stock was the day's most actively traded.
After saying it would start legal proceedings in a pre-market announcement, the commodities group filed a writ of summons in the Hong Kong courts against Hong Kong-based Arnaud Vagner, who worked as a credit analyst for Noble from 2011 to 2013; and Seychelles-registered Enlighten Ace Ltd, which has registered the online website Iceberg Research.
Noble is seeking damages on claims of conspiracy to injure Noble by driving down its share price and a allegedly spreading false or misleading information. Noble believes that Mr Vagner is a key player behind the allegations published by Iceberg.
The suit came after Iceberg Research published a report over the weekend alleging that Noble was understating its debt position. That was the third report by Iceberg, which had previously raised questions about Noble's treatment of long-term investments and its marked-to-market contracts.
In the report, Iceberg said other analysts, including credit rating agencies, wrongly accepted Noble's accounting of inventories as liquid assets that could be used to arrive at its net debt position, because suppliers who were also creditors might hinder the sale of that inventory.
Asked about that issue, Standard & Poor's (S&P) credit analyst Cindy Huang defended the ratings agency's methodology.
"S&P believes that commodity traders' inventory are typically highly liquid and could be used to repay debt when required," she said. "Commodity is not as liquid as cash so we apply a haircut to the inventory value of commodity. The haircut varies depending on our assessment of the liquidity of the commodity. For example, we would apply 10 per cent for oil, which is highly liquid as it has a deep market, compared with coal/cotton which we apply a higher hair cut of 25 per cent. We do not include inventory held for processing as an offset for borrowings as we don't consider it to be liquid and readily available for debt repayment."
Noble had provided rebuttals to the two earlier Iceberg reports. Asked about a response to the third report, a Noble spokesperson said the company would not add anything beyond its announcement about the start of legal action.
"Their actions, and their timing, have been calculated primarily to inflict damage rather than to facilitate the distribution of research," Noble said in its announcement.
In its latest report, Iceberg said that it viewed itself as a whistleblower. The outfit also claimed that one of its members had previously reported certain activities to the Maritime and Port Authority of Singapore (MPA) in 2013, and alleged that if the regulator had acted on that information earlier, the fraud that sent OW Bunker into bankruptcy in 2014 "could certainly have been avoided".
MPA had no comment.
Analysts in general have not been overly alarmed as a result of Iceberg's allegations.
"The allegations do not dislodge the basic value proposition for Noble," Religare research analyst Nirgunan Tiruchelvam said. "It's a leading and highly diversified commodity trader."
The attention on Noble has made its stock an active trading counter. Fund manager Invesco on March 19 pared its stake to 4.85 per cent from 5.09 per cent by selling 15.4 million shares at 85.45 Singapore cents apiece just days after becoming a substantial shareholder.
Noble's stock has lost about a quarter of its value since Iceberg's first report on Feb 15.