Goldilocks backs SGX's compliance order on Noble

But others are sceptical of an independent advisor’s impact on the deal.

The Singapore Exchange Regulation (SGX RegCo) required Noble Group Limited (NGL) to appoint an independent financial advisor (IFA) that will look into some concerns about the company’s debt restructuring plan.

Abu Dhabi-based fund Goldilocks, a vocal critic of the restructuring plan, said they welcome SGX’s latest action, which is “weighing in on Noble’s proposed restructuring that unfairly favours management and penalises shareholders as well as other minority stakeholders,” they said, “Noble has been treating minority stakeholders with disdain! We are glad that the regulators have heard the cries of foul play from minorities from Hong Kong, across Asia to London.”

As one of NGL’s top shareholders, Goldilocks has been piling pressure on the struggling commodities trader after it warned other shareholders to reject the company’s debt restructuring plan. The fund currently owns 8.1% of NGL.

It insisted that the SGX ensure that the IFA’s independence is safeguarded at all times. “The IFA’s scope should adequately cover all aspects of true discovery of value and analysis of key assets that are at the core of future value. Further, the IFA should independently opine on whether the current and past reported financials were accurately reported,” they said.

In an interview with Singapore Business Review, Securities Investors Association (Singapore) president and CEO David Gerald explained, "The advantage of an IFA is to obtain an independent in-depth review of the restructuring proposal, as there is significant change in the shareholding structure in the proposed restructuring plan. This is to ensure that the restructuring plan is fair and reasonable to creditors and shareholders."

Goldilocks urged the IFA to focus on the proposed management compensation and best industry practices. “The most recent handsome reward of US$35m for its top four management for FY2017, equivalent to approximately 20% of Noble’s total market capital, despite its historically highest losses for any financial year, is another example of its self-serving interests with total disregard for other stakeholders, ethics and corporate governance standards.”

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“After having lost almost $5b in FY2017, it is unacceptable for Noble directors to agree to any upfront share allotment to Noble’s management. Management compensation should be benchmarked to future profits, and should contain provisions for clawback in case such profits are reversed in subsequent years,” it added.

However, Keshik Capital partner Alex Turnbull thinks the IFA’s fairness opinion on valuation is likely to be quite inconsequential in and of itself. “This really depends on the scope of (the IFA’s) work. What will be very important is if they opine on whether creditors and shareholders should waive their rights to sue the board, management, and auditors of the company. To waive these rights would be patently against the interest of all investors since it can only be a source of incremental recoveries. The fairness opinion on valuation is likely to be quite inconsequential in and of itself,” he said in an interview with the magazine.

When asked where the deal is headed, Turnbull said, “Management and former board members should not be able to vote on waiving rights to litigate as they are obviously conflicted, but given the poor corporate governance at Noble that is no guarantee they will not be barring regulatory action.”

SGX RegCo cited media reports showing woes about the debt restructuring plan. Part of those is focused on a clause stating that the arrangement provides the “full release of any and all other claims” that any senior creditor may have against Noble Group, its management, directors, advisers, agents and representatives in relation to its existing senior debt.

“Such language aims to absolve Noble, its advisers and representatives from claims or legal action related to its senior creditors’ pre-existing debt securities,” said Basil Hwang, a managing partner at Hwang Hauzen LLP, who specialises in financial regulation.

Turnbull commented, “I think some of the details of the negotiations with the steering committee have not been particularly flattering to the board and management which have continued to put their interest in staying out of litigation ahead of their fiduciary obligations. There is no reason why this agreement should require terms around waiving litigation rights since they serve no stakeholders aside from the board and management’s own narrow interests.”

SIAS clarified that Noble is still in talks with the organisation in order to engage with shareholders. Gerald said, "Noble has been in dialogue with SIAS and SIAS has been informed by Noble’s senior management that they will engage with shareholders at a dialogue with SIAS at the appropriate time when they can share more details of the restructuring plan and address the concerns of shareholders."