Tuesday, December 11, was going to be a big day for creditors of Noble Group, and observers of the Singapore-listed commodity trading company generally: it was the revised deadline day for its proposed $3.5 billion restructuring, among the most complex ever attempted in Asia.
It won’t matter now. It will pass without consequence. Because on Thursday, the whole grand conceit was torpedoed by the joint forces of the Monetary Authority of Singapore (MAS), Singapore Exchange Regulation (SGX RegCo) and the Singapore Police Force.
Central to the whole restructuring had been a listing in Singapore of what was known as New Noble, the post-restructured organization. Thursday’s statement announced that Singapore was not willing to let it do so.
All of Noble Group’s problems stem from allegations that it was mis-valuing contracts in accounts, allegations that came from Iceberg Research, a company subsequently linked to Noble former employee Arnaud Vagner.
Thursday’s joint statement refers to a set of simulated financial statements Noble Group submitted to SGX RegCo to illustrate the effect on the New Noble group’s financial statements after considering potential failures to comply with accounting standards.
These simulated statements, from Noble itself, show that the net asset value (NAV) of New Noble could be adjusted downwards by 40% as of December 31, 2017, and 45% for March 31, 2019 – in addition to more than $2 billion of write-downs Noble had already made in its 2017 financial year.
The scale of this – how shall we put it – mismatch, coupled with the fact that the new company’s NAV could fall even further, pending other investigations from the MAS and the commercial affairs department of the police force, have put off the regulators having the new company on its boards.
“MAS and SGX RegCo have concluded that there are significant uncertainties about the financial position of New Noble,” said the statement. “It would be imprudent to allow the re-listing as investors will not be able to trade in New Noble’s shares on an informed basis.”
So, is that it? Curtains for Noble?
Plan B was outlined in August, just in case the re-listing option failed. Noble said then that, in those circumstances, it would file for administration in the UK, with creditors then taking control, leading to the likely wipeout of shareholders and perpetual bondholders.
About-face: Noble Group's logo
Creditors include Deutsche, ING and hedge funds Taconic Capital Advisors, Värde Partners and Owl Creek Asset Management.
They are likely to opt for a ‘pre-pack’ administration, which means the debt restructuring proceeds in court along the lines of a plan that the company and its creditors have already agreed.
On Friday, it said in a statement it “intends to take steps to preserve value for stakeholders”, in a way that completes the restructuring as planned, but without the transfer of the company’s listing status.
It also said it plans to write to the Accounting and Corporate Regulatory Authority (ACRA), whose queries about Noble’s accounts have been central to the decision not to allow a re-listing, and will challenge ACRA’s positions.
An interesting question is what it means for Singapore, too. It never looks good for a jurisdiction when misconduct occurs at one of its listed companies, though Singapore is hardly the first to encounter such a situation.
The exchange and its regulators had some competing interests to consider in reaching this decision: the exchange badly needs listings, as it has struggled to attract big new names, it has lost a number of de-listings – many of them through Temasek – and trading in its stock markets is anaemic.
But on the other hand, it also has to stand for something: a certain minimum standard of investor information and confidence in its listed companies. That’s the side the regulators have come down on here, arguing it’s just not appropriate to allow back a company that appears to have mis-stated its accounts so profoundly.
There is a strong argument, though, that Singapore should have made its position clear earlier.
“The Board regrets that after almost 19 months of engagement with its stakeholders, including shareholders, creditors and regulators, it has been informed” that it will not be able to re-list, the Noble statement says, calling it a “very disappointing development in this protracted process”.
You can almost hear the sleepless nights of tireless negotiation in the statement. Nineteen months? Could the Singaporeans not have made it clear sooner that it would not permit a re-listing? Its investigation was only announced on November 20, a few days before the restructuring was due to be completed.
So, nobody really comes out of this looking good – and certainly not noble.