Noble's restructuring hangs in the balance amid investigations

One day after Singapore regulators launched an unprecedented tripartite probe into troubled Noble Group for suspected breaches of securities laws and accounting practices, there appears no clarity on whether the commodity group will be able to forge ahead with its hard-fought debt rescue plan or it risks being upended.

Noble, for one, seemed confident, stating in an early Wednesday announcement that the proposed restructuring is in the best interests of all stakeholders and that it will work towards implementing it "within the previously disclosed timelines".

That may be overly optimistic as the new Noble - a crunched down version of old Noble that was once Asia's top commodity trader but sold billions of dollars of assets as it tottered on hefty debts - is expected to be listed in less than a week on the Singapore Exchange, an event that was set to mark the fruition of a protracted and acrimonious US$3.5 billion debt revamp to save the Hong Kong-based firm.

"It's uncertain how long the Singapore regulatory processess may take and the consequences. The company is running out of time... it definitely gives the restructuring an element of doubt", said Brayan Lai, analyst at Bondcritic. Others are not so quick to jump to conclude that the debt revamp may be held up - or worse, scuppered.

"The fact that the authorities are investigating the company does not automatically derail the restructuring process, which has been sanctioned by shareholders and the courts of England and Bermuda," said Stefanie Yuen Thio, joint managing partner of TSMP Law Corporation.

Noble, whose shares were suspended from trading on Monday to facilitate the restructuring, said it received a letter from Singapore's Commercial Affairs Department (CAD) and the Monetary Authority of Singapore (MAS) dated November 20 requiring it to provide access to documents relating to the accounting treatment, consolidation and reporting of certain contracts for the financial years ended December 2012 to 2017.

It is required to provide documents relating to preparation and consolidation of the accounts of Noble Resources International Pte Ltd (NRIPL) - Noble's wholly-owned unit that has also received a letter from CAD and MAS for access to information on its financial statements for 2012-2017.

The company said NRIPL received a written query from the Accounting and Corporate Regulatory Authority (Acra) on certain aspects of its financial statements for financial years 2012-2016.

Noble and NRIPL intend to cooperate fully with the authorities in their investigation, said the company, adding that in particular, NRIPL will provide its views to Acra on the regulator's assessments as set out in the letter.

"Acra is currently reviewing the audit work papers of the auditors for NRIPL," said Acra in response to The Business Times' queries on the matter.

This is the city state's first ever joint probe by all three agencies - Singapore's white-collar crimebuster (CAD), the central bank (MAS) and the accounting and corporate regulator (ACRA).

On Tuesday, the regulators said they were jointly investigating Noble for suspected false and misleading statements and breaches of disclosure requirements under securities law and potential non-compliance with accounting standards under the Companies Act by NRIPL.

The latest development stunned the market but may be inevitable as Noble has been at the receiving end of stinging criticism over the past three years for its accounting methods, chiefly by staunch critic Iceberg Research. Yet, no one seems to have missed the ill-timed development for the struggling group.

"It is unfortunate that Noble is now eclipsed in a regulatory probe just as it is about to step forward with a new lease of life under a new management," said Robson Lee of Gibson Dunn & Crutcher LLP, adding that he hoped the authorities would wrap up the probe "within a short period" to allow Noble to move on.

"I hope the current probes will not stymie its restructuring plans. Any enforcement actions against the responsible errant officers should be ring-fenced as much as possible to contain any inadvertent collateral damage to the group and its stakeholders," he continued.

For Noble investors, who only three months ago overwhelmingly voted in favour of the ailing commodity trader's restructuring at a shareholder meeting and cleared a major hurdle for the plan to pull through, there will be fresh worries that the revamp will be stalled, for example via an injunction brought about by the latest news of the probe.

"Minority shareholders do not currently have a ready market for their shares... an injunction could leave them stranded in trading limbo," said Ms Thio.

It is unclear if the restructuring support agreement (RSA) that received the requisite nod from Noble's senior creditors and shareholders includes any forbearance or waivers that apply to the current circumstance. Also, it is unclear if stakeholders' approval can be invalidated in the event of any possible mis-statements in the relevant documents that could arise as a result of the probe.

BT's queries to Noble's ad hoc group of senior creditors on whether the development could prompt a revote or that the group was sticking to its stand on the restructuring did not draw any response.

Ms Thio remarked: "The challenge is that there is insufficient visibility on the evidence that has just come to light. It may therefore be better to wait for the outcome of the investigations. Those who suffer loss are not precluded from starting a lawsuit at that stage, for damages or even an injunctive order."

It is believed that MAS and CAD have set a deadline for the group to respond accordingly.

Even if the Singapore regulators' move is unfolding after three years of much hullabaloo over Noble's governance and accounting methods, it's still seen as a positive sign.

Alex Turnbull, managing partner at Singapore-based Keshik Capital, who has in the past weighed in on Noble's woes, said: "Singapore's reputation for corporate governance is on the up with this."

Anita Gabriel

22 November 2018