Noble gets go-ahead for controversial restructuring plan, pays funds into court in ongoing legal suit
SINGAPORE (Nov 19): Troubled commodities trader Noble Group is moving ahead with a controversial restructuring plan that will see its investors’ shareholding significantly diluted and its creditors owning most of the company. Meanwhile, a former employee whom it sued for conspiracy to injure the company by unlawful means is expecting to be vindicated and compensated for his legal costs.
On Nov 15, Noble said its restructuring plan had been sanctioned by the relevant courts and would proceed. According to its indicative timetable, the last date for trading in its shares is Nov 16, after which trading in its shares will be suspended. The share transfer books and register of members of the company will close at 5pm on Nov 21 until Nov 27. This is to determine the entitlements of the shareholders in respect of shares in “New Noble”, which is the new entity that will own the company.
During an earnings call on Nov 13, Paul Jackaman, group chief financial officer of Noble, said: “Both the board and senior management look forward to the completion of the restructuring and starting the next chapter with New Noble.”
For the nine months to Sept 30, Noble posted a 30% y-o-y decline in revenue to US$3.54 billion ($4.87 billion), and a net loss of US$298.8 million versus a net loss of US$3.05 billion for the same period last year. During the nine months, tonnage fell 26% y-o-y to 43.9 million tonnes, and total operating income came in at US$163.3 million versus a total operating loss of US$208.5 million for the same period last year.
Noble said global commodity prices were strong during the nine-month period, driven by demand growth, production cuts and economic sanctions. Its profitability was affected, however, by expenses associated with implementing the restructuring, finance costs on existing senior debt and losses from discontinued operations.
Noble’s energy division posted a 25% y-o-y decline in revenue to US$1.47 billion, and a narrower operating loss from supply chains to US$51 million, from US$96 million for the same period last year. Among the weaker contributors in this division was the energy coal business. Total volumes were down 22% y-o-y in the first nine months of 2018, as Noble exited its business in the US to focus on Asia-Pacific. Constrained access to trade finance lines also prevented the business from entering into new short-term opportunities to take advantage of the strong price environment.
Over at Noble’s metals, minerals and ores division, revenue dropped 29% y-o-y to US$2.07 billion, while operating income from supply chains came in at US$126 million, versus an operating loss of US$78 million for the same period last year. Noble said its joint venture in a Jamaican alumina plant benefited from strong alumina prices. The company also saw “stable” profitability and volumes at its special ores and industrial minerals, and Asia base metals businesses. However, its metallurgical coal and coke businesses were hit by constrained liquidity and trade finance.
Separately, according to documents sighted by The Edge Singapore, Noble has been ordered to pay HK$2.5 million ($439,300) to the courts in Hong Kong, in connection with its legal suit against Arnaud Vagner and Enlighten Ace, the Seychelles-based company that operates Vagner’s Iceberg Research website. Since 2015, Iceberg Research has been accusing Noble of understating its debts and inflating its earnings, and likened the company to Enron.
Vagner tells The Edge Singapore that Noble was ordered to pay the funds into court because the company may not have the financial means to repay his legal fees. “I should be able to recover this money once the lawsuit ends.”
In addition, Noble was ordered to pay HK$519,520 to cover Vagner’s indemnity costs for this application. The award of indemnity costs, which does not happen often, allows a winning party to recover legal costs from the losing party, explains Eunice Chua, assistant professor of law at Singapore Management University. Indemnity costs can be awarded in certain circumstances in which one of the parties has shown reprehensible conduct, Chua adds. This includes action that is brought in bad faith as a means of oppression or for other improper purposes; as well as action that is speculative, hypothetical or clearly without basis.
Other reasons for awarding indemnity costs include dishonest, abusive or improper conduct by the opposing side in the course of proceedings; and action that amounts to wasteful or duplicative litigation or is otherwise an abuse of process. “As costs are essentially in the discretion of the court, the courts have maximum flexibility to make appropriate costs orders in the circumstances of the case before them,” Chua says.
This story appears in The Edge Singapore (Issue 857, week of Nov 19) which is on sale now. Subscribe here
