Noble disagrees with Singapore authorities’ accounting positions and will continue restructuring plan

A Singapore 10-dollar note Photo by Leslie Shaffer

Troubled commodity trader Noble Group said early on Friday that it disagreed with Singapore authorities’ assessment of its accounting practices and that it would continue with its restructuring despite the ruling that it will not be allowed transfer its listing status to New Noble.

On Thursday, the Singapore Police Force, the Monetary Authority of Singapore (MAS) and Singapore Exchange Regulation (SGX RegCo) said in a joint statement that there were “significant uncertainties about the financial position of New Noble,” and the company therefore would not be allowed to transfer the listing status.

That was amid on-going investigations into Noble and its subsidiary, Noble Resources International (NRI), by the MAS, the Commercial Affairs Department (CAD) of the Singapore Police and the Accounting and Corporate Regulatory Authority (ACRA), the joint statement on Thursday said.

On Friday, Noble said it “regrets” that after 19 months of negotiations with stakeholders, including shareholders, creditors and regulators, the authorities’ have decided to disallow the listing-status transfer to New Noble, which will be its post-restructuring entity.

“While this is a very disappointing development in this protracted process, the board, having consulted with the Ad Hoc Group, intends to preserve value for all stakeholders by completing the restructuring in the form set out in the circular and the explanatory statement, other than the transfer of the company’s listing status,” Noble said in the statement filed to SGX before the market open on Friday.

“In doing so, the bard, in discharging its fiduciary duties, may implement the restructuring through a court-appointed officer,” it said.

Disputing authorities’ accounting treatments

Noble also said that NRI disagreed with accounting positions taken by ACRA and it intended to submit a comprehensive response.

The company noted that the investigation has focussed on NRI, with no current investigations of any individuals, and that its related to “technical accounting-related issues.”

On Thursday, authorities said Noble had submitted to SGX RegCo a simulated set of financial statements to show how New Noble’s financial statements would appear after including the potential accounting non-compliance ACRA cited in its letter to NRI.

That simulation showed New Noble’s net asset value (NAV) as of the end of 2017 could be around 40 percent lower and about 45 percent lower as of 31 March, which would be in addition to more than US$2 billion in writedowns Noble made in 2017, the authorities said.

On Friday, Noble disputed the importance of the simulated financial statements.

Disputes simulated statements

“These simulated financial statements, which were submitted on a confidential basis, do not represent the views of the company and were intended only to illustrate the effects of applying the ACRA accounting positions,” Noble said.

The commodity trader added that while the simulated statements showed large pro forma net asset value adjustments downward, they also showed that Noble’s pro formal net loss of New Noble for end-December and end-March would be narrowed by around 45 percent and 99 percent, respectively.

It added that one of ACRA’s contentions — over the treatment of overhead costs and how they should be included in the fair value of derivatives — would be “completely out of line with industry practice.”

In mid-November, ACRA, CAD and MAS said Noble was under investigation for suspected false and misleading statements and breaches of disclosure requirements under the Securities and Futures Act, while NRI was under investigation for potential non-compliance with accounting standards.

At the time, Noble said it would cooperate with the investigation, and then subsequently added that it would extend the timeline for its restructuring.

The joint investigation reignited a years-long drama over the troubled commodity trader just as it had appeared to be reaching an end.

Noble has faced a gamut of a once-anonymous critic, Iceberg Research, whose allegations of accounting issues had weighed its share price, as well as a prolonged commodity-price slump which sapped its earnings over a period of years.

The company also faced controversy over the twists and turns in its efforts to restructure into New Noble and leave behind much of its debt.

The long-running restructuring drama had appeared to be at an end last month, when Noble requested its shares be suspended from trade permanently. The shares closed at S$0.081 on that day, a far cry from their height of around S$18.14 touched in early 2011.

 

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