Noble pushes for restructuring after authorities block re-listing

Authorities cited that New Noble’s net asset value could be adjusted downwards by 40-45% and disable investors to make informed choices.

The Monetary Authority of Singapore (MAS) and the Singapore Exchange Regulation (SGX RegCo) will not allow Noble Group Limited to transfer its listing status to New Noble, the two authorities said.

According to a joint statement, allowing Noble to re-list is “imprudent” given that “significant uncertainties” about the financial position of the New Noble will disable investors from trading New Noble’s shares on an informed basis.

This follows a review of the findings to date from the ongoing investigations into NGL and Noble Resources International Pte Ltd (NRI) by MAS, the Commercial Affairs Department (CAD) of the Singapore Police Force, and the Accounting and Corporate Regulatory Authority (ACRA).

Restructuring continues
In a separate announcement, Noble said that it will proceed with the rest of the restructuring except the transfer of the company’s re-listing. This means that the board will discharge its fiduciary duties and implement the restructuring through a court-appointed officer.

Noble has alternative restructuring steps, as set out in its restructuring support agreement (RSA), which will allow it to file an administration application to the English and Bermuda courts. If this proceeds, creditors will be prioritised, perpetual capital securities holders will not receive payment, and shareholders that did not vote in favour of the restructuring will not be able to receive any shares in New Noble.

Also read: Noble inks debt restructuring agreement

SGX RegCo has previously urged Noble's creditors to reconsider the restructuring deal. The company said the decision is “very disappointing development in this protracted process” as it has already has sought and obtained all shareholder and creditor approvals, as well as obtaining the sanction of the English Court and the Bermuda Court for the restructuring schemes and recognition of the English Scheme in the U.S.

Lower net asset value
After the probes started, Noble submitted to SGX RegCo a set of simulated financial statements to illustrate the effect on New Noble’s financial statements after considering the potential non-compliance with accounting standards highlighted by ACRA in a letter it gave to NRI on 20 November 2018.

MAS and CAD said that the simulated financial statements show that the net asset value (NAV) of New Noble as at 31 December 2017 could be adjusted downwards by about 40%, and that the NAV as at 31 March 2018 could be adjusted downwards by about 45%. These adjustments would be in addition to the write-downs of more than US$2b already made by NGL in FY2017, MAS and CAD added.

Moreover, New Noble’s NAV could be hurt by further reductions arising from investigations by CAD and MAS that extend beyond the potential non-compliances with accounting standards highlighted by ACRA.

Noble added that the simulated financial statements also demonstrated that the result of applying the ACRA Accounting Positions would decrease the pro forma net loss of New Noble as at 31 December 2017 and 31 March 2018 by approximately 45% and approximately 99% respectively.

CAD and MAS are probing other relevant areas in connection with the preparation and disclosure of NGL’s financial statements, including valuation of commodity contracts and other related assets. “The findings arising from these investigations could potentially lead to a further erosion of New Noble’s NAV,” they added.

MAS and SGX RegCo noted that they have been reviewing the allegations against Noble since 2015, even if statutory auditors have issued clean audit opinions for 2014 to 2016. “The review of this and other information provided the basis for authorities to commence overt investigations into potential breaches of Singapore’s laws,” they added.

Noble will also submit to ACRA a comprehensive response to the assessments and questions in the ACRA letter. The company defended its derivative treatment for its variable marketing contracts, its treatment of overhead costs, and the split between its current and non-current assets.