Noble says it will not make payment on 2018 bonds

Noble Group will not be paying the principal and interest on its US$379 million bonds due on March 20, nor the coupon due on its 2020 notes that it has already missed.

The group announced this on Friday evening, saying that it has taken into consideration both the advice received from its legal and financial advisers, and its obligations under the restructuring support agreement (RSA). It has also consulted extensively with the ad hoc group of creditors whom it has been in negotiations with, it added.

Not paying the 2018 bond would constitute an event of default, but this would probably not affect Noble much given that it already has 65 per cent of creditors in support of its RSA, said Brayan Lai, an analyst at credit research firm Bondcritic. "It's a black mark but it probably won't rock the restructuring in a massive way at this point where it's going," he said.

Nonetheless, 2018 bondholders who did not agree to the RSA would still be able to challenge the terms in the RSA in court, and therefore would still be able to exert some influence, he added.

Noble has signed the RSA with creditors holding 46 per cent of its senior debt, but it is not clear how much of the 2018 bond this group holds.

To start enforcement proceedings against Noble, holders of at least 25 per cent of the bonds must agree to do so, according to the prospectus.

The announcement caps a topsy-turvy week for Noble's shares, which spiked to as high as 17.4 Singapore cents on Monday before gradually falling to as low as 12.9 cents in intra-day trading on Friday. The stock ended trading at 13.7 Singapore cents on Friday, 1.6 cents or 10.5 per cent lower than its previous close, before the announcement was made.

Noble said on March 12 that it was availing itself of a 30-day grace period to pay the coupon on its 2022 bonds due on March 9. There is no similar grace period on the 2018 bond maturity.

On March 14, it announced that it had signed the agreement with the ad hoc group, and that other creditors representing another 19 per cent of its claims had indicated their support for the restructuring, subject to completing internal approval processes.

Noble will need at least 75 per cent of its creditors by debt value and 50 per cent by number for its scheme of arrangement to be approved.

Craig Pirrong, professor of finance at the University of Houston who conducts research on the economics of commodity markets, notes that Noble is still short of reaching this requirement. "I think they will likely get there, but it's not a slam dunk," he said.

Goldilocks Investment Company, Noble's fifth-largest shareholder, has expressed its displeasure with the RSA and warned that it will escalate the matter.

Andrea Soh

17 March 2018