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Nikkei Markets

Noble Group lays out options as shareholder fight escalates

Singapore Exchange urges dialogue, Goldilocks launches legal action

On Wednesday, Noble Chairman Paul Brough took to a Singapore Exchange filing to share his second letter to stakeholders in a week.   © Reuters

SINGAPORE (Nikkei Markets) -- Noble Group's tussle with a major investor has intensified ahead of a crucial shareholders' meeting, with the latest twist adding legal questions to the issues of transparency and fairness that have punctuated the saga so far.

Debt-laden Noble, which is based in Hong Kong, listed in Singapore, and registered in Bermuda, has been engaged in a public war of words with Abu Dhabi-based Goldilocks Investment Company over its restructuring plan, which it is billing as its last and only hope for survival.

Goldilocks, which owns some 8.1% of Noble, claims that plan is not in the interest of shareholders. Although the fund has said it has an alternate plan, it has not provided any details.

On Wednesday, Noble Chairman Paul Brough took to a Singapore Exchange filing to share his second letter to stakeholders in a week. Brough said the "vitriolic and misleading statements" in Goldilocks' letters and press releases were causing great harm to shareholders and urged them to vote in favor of the proposals at the annual general meeting on April 30.

"Absent completion of the proposed restructuring, shareholders will receive nothing," he said.

Brough also addressed the latest controversy - Noble's decision to invalidate Goldilocks' notice to nominate an alternate slate of five independent directors at the AGM. Noble's reason was that Goldilocks held its shares through a nominee and so was not a member on the company's register. Brough said allowing the nominations would violate its by-laws and the laws of Bermuda.

Goldilocks responded by saying it had filed a lawsuit in Singapore seeking remedies, including a declaration that it is entitled to propose new directors. In its statement, the fund said it is also seeking an urgent injunction to restrain Noble from proceeding with its AGM.

Abhineet Kaul, director for public sector and government practice at consultancy Frost & Sullivan, said that while it is not unusual for company boards to turn to legal technicalities as an end run around dissident shareholders, this one was unusual.

Robson Lee, a partner at Gibson, Dunn & Crutcher LLP, which handles capital markets issues, said that in his view, Noble was using a "very thin technicality" to try to invalidate Goldilocks' efforts to nominate a new slate of directors. He added that if it was allowed, given Noble's Singapore listing and Bermuda registration, "the company would effectively have very few shareholders."

"I would be surprised if any court of law, whether in the country of origin or the Singapore High Court, would allow such a technicality to effectively block shareholders from exercising the right to vote a new board of directors," Lee said.

Lee also pointed to the urgent need for Noble and Goldilocks to resolve the issue quickly as delaying a restructuring plan could lead to the company's collapse.

For its part, the Singapore Exchange's regulatory arm urged dialogue.

"We invite the company, the senior creditors as well as Goldilocks to engage in an open dialogue to resolve this matter substantively rather than through legal form and technicalities," an SGX spokesperson said in an email late Tuesday, adding that it would facilitate the talks.

Lawrence Loh, associate professor at National University of Singapore's Business School and a director of its Centre for Governance, Institutions, said the Noble case exposed a dilemma for regulators - at what point to step in, especially as it is not clear whether Noble has violated any rules.

SGX has already questioned Noble in some instances. Following an early March query, Noble revealed that former co-chief executive Jeff Frase had received a near $20-million remuneration package. Later, at SGX's urging, the company dropped a proposal to treat shareholders differently, depending on whether they voted in favor of or against the restructuring.

In its Wednesday statement, Goldilocks again referred to Noble's lack of disclosure and transparency and said it had ignored multiple requests for material information "that goes to the core of the restructuring plan."

Noble's initial proposal to restructure by swapping half its $3.5-billion debt for equity was seen as unfair to shareholders as it gave them just 10% of the restructured company. It later revised the plan to give equity owners a total of 15%.

According to Noble, more than 80% of senior creditors, and its founder, Richard Elman, who owns around 18% of the company, support the latest plan.

Frost & Sullivan's Kaul said that Noble's restructuring effort is unusual in itself. "Typically, a company in the situation of Noble would have liquidated a long time back," Kaul said.

Founded in 1986 as a dealer in coal, gas, metals and other commodities, Noble has been slammed by the commodities downturn, and by its reliance on out-of-favor commodities, such as coal.

In 2015, its stock price and reputation took a hit after anonymous company Iceberg Research alleged accounting irregularities at the commodity trader. Noble has denied the allegations repeatedly and in detail.

The company's share price stood at just 0.09 Singapore dollars ($0.068) on Wednesday, down from its peak of over S$11 in mid-2014.

--Leslie Shaffer

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