Noble senior creditors: US$800 million investment follows accounting due diligence

U.S. one-dollar currency notes; taken September 2018.U.S. one dollar bills.

Noble’s senior creditors, represented by the ad hoc group, or AHG, wrote a letter to the troubled commodity trader’s executive chairman, which was filed to SGX on Monday, outlining its support for the restructuring and its review of accounting practices.

The AHG noted in the letter, which was dated last week, that the restructuring deal calls for senior creditors and certain other stakeholders to commit US$800 million of new capital and reinvest US$250 million of company cash balances from asset sales into the trading arm of “New Noble,” which will be the post-restructuring entity.

That was “a strong statement of support regarding the future potential of the business,” the letter said.

It also pointed to questions from “certain public commentators,” which it did not name, about the financial statements of Old Noble.

Due diligence of accounting

“As part of their review of restructuring alternatives, and solely for their own account, the AHG and its financial advisors conducted a financial and business diligence exercise giving specific attention to matters raised by public critics,” it said.

“The AHG accepted the Ernst & Young audit opinions, the E&Y audited historical financial statements and the PWC report on accounting policies at face value,” as part of the review, it said.

The letter added that balance sheet write-downs over the past year have “conservatively recalibrated” the valuations of assets, with the AHG expected the New Board to take a similar conservative approach ahead.

It was also positive on a deal that took a contentious and controversial route toward the finish line.

“Following a long and arduous process, the company and its stakeholders negotiated a win-win deal where the company will obtain a fresh start, existing shareholders will receive an extremely high recovery based on precedent (as opposed to getting nothing), and creditors will avoid the potential costs and delays associated with a court monitored insolvency process,” the letter said.

‘Well-positioned’ for turnaround plan

The AHG said New Noble would be “well-positioned” to execute it turnaround plan, with a focus on the market segments where it has historically been most profitable — energy coal, met coke, carbon steel materials, LNG and aluminum — and with a “world-class” New Board.

The AHG also noted that corporate restructuring activity has not been as prevalent in Asia as in Europe and the U.S., adding that the Noble deal was an “important milestone” for developing regional best practices. It said that the transaction has helped to spur changes to Singapore’s legal and regulatory infrastructure to manage corporate defaults.

“The Noble Restructuring gives an initial look at how things may play out and, based on that, it appears Singapore is ‘open for business’ when it comes to complex, cross-border restructurings,” the letter said.

In a separate filing to SGX before the market open on Monday, Noble Group said that it expected to complete the disposal of two vessels, Ocean Ambition and Ocean Forte, soon, with aggregate proceeds of the four Panacore vessels at around US$95 million. That will allow Noble to retire around US$63 million in debt, with aggregate net proceeds of US$32 million, it said.

It noted that its underlying selling, administrative and operating (SAO) expenses have continued to decline amid Noble’s cost-reduction efforts.

Noble also said it was finalizing the documentation to begin parallel schemes of arrangement in England and Bermuda to implement the restructuring, with the schemes intended to be launched by 21 September.

““We are making strong progress towards the completion of the restructuring. There has been positive momentum since we received shareholder approval to proceed with the restructuring,” Paul Brough, chairman of Noble, said in the filing.

 

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