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After Landmark Default, Noble Group Faces Key Shareholder Test
2018-03-21 01:47:13.911 GMT
By Denise Wee and Lianting Tu
(Bloomberg) -- As Noble Group Ltd. hobbles past its first default, the next key test for the embattled commodity trader is a shareholder meeting as early as April where opponents of its survival plan could effectively force it into insolvency.
The company has said it won’t repay a $379 million bond that came due on Tuesday, and that it would file for administration in the U.K. if investors block its restructuring proposal. Shareholders are due to meet in late April or early May to approve the sale of Noble’s assets to a new company. The deal requires approval of at least 50 percent of shareholders voting at the meeting, just as fresh signs of a revolt by some of the equity investors emerge.
Noble’s landmark default marks a spectacular downfall for a company that was once Asia’s largest commodities trader. It raises the risk that trading partners such as coal miners and steelmakers could walk away from deals with the company, already reeling from a $4.9 billion loss in 2017 after years of critiques of its accounting. On top of that, the price tag for advisers and other expenses for the restructuring is approaching the company’s entire market value of $114 million.
Read more about the estimated cost for Noble’s survival plan
As shareholders survey their options, other concerns have emerged. Goldilocks Investment Co., a major shareholder of Noble Group, sued the company and executives, including founder Richard Elman, in the Singapore High Court, alleging the trader inflated profits to raise money. On Wednesday, the company said while it hadn’t received a copy of the suit, it’s prepared to defend itself.
Elman, who remains the top shareholder, resigned as a non- executive director, according to a statement Wednesday. That came a day after S&P Global Ratings cut its credit score on Noble to D, a level signifying default, and said that the failure to pay the bonds will trigger cross default on its other obligations.
A representative at Noble’s external public relations firm wasn’t able to immediately comment.
Timeline of Noble’s Restructuring Plan
Event | Time
|Late April / early
Shareholder meeting |May
Begin consent solicitation for the perps |Early May
|Late May / early
Perp bondholder meeting |June
File applications for Scheme(s) |Early May
Senior creditor meeting to vote Scheme(s) |Mid June
|Mid June - early Chapter 15 recognition of Scheme(s) in U.S. |July
Restructuring Effective Date |Mid - late July
There has also been pushback from a group of junior noteholders. A representative for a group holding more than 25 percent of the company’s $400 million perpetual bonds, which have no maturity dates and are subordinated to the senior creditors, said last week that it will keep pushing for a better deal.
That flags divisions even after about 46 percent of senior debt holders signed a binding restructuring support agreement earlier in March. The deal has a clause that releases the company from claims made by senior creditors, which could prevent those bondholders from seeking immediate repayment on defaulted obligations.
“The risk here is more that shareholders and perpetual bondholders will disagree to the deal than the senior bondholders,” said Neel Gopalakrishnan, senior credit strategist at DBS Group Holdings Ltd.
Click here for a QuickTake explaining Noble’s controversial restructuring plan
The company has long said it wants to stay out of court- driven insolvency proceedings, with Chairman Paul Brough warning that such a process would be “very damaging.”
Many senior creditors, at least, may be in agreement.
The default this week opens the door for holders of Noble bonds to take legal action, but they likely won’t, according to Annisa Lee, head of Asia ex-Japan flow credit analysis at Nomura International (HK) Ltd. “If they push the company into liquidation, there will be very low or zero recovery for them,”
--With assistance from David Yong.
Timetable regarding publication of Final List:
Tuesday 10 April 2018: publication of Initial List
5:00p.m. London time on Thursday 12 April 2018: deadline for market participants to submit additional obligations for inclusion on the Supplemental List
7:00p.m. London time on Thursday 12 April 2018: deadline for publication of the Supplemental List
5:00p.m. London time on Monday 16 April 2018: deadline for market participants to challenge inclusion of any obligation on the Supplemental List
5:00p.m. London time on Wednesday 18 April 2018: deadline for DC to resolve any such challenges
Promptly following resolution of all challenges: publication of Final List.
|Auction Settlement Terms||
The Auction Date is Wednesday 25 April 2018.
Any dealers wishing to participate in the Auction as a participating bidder should note that the cut-off time to submit a Participating Bidder Letter (a form of which is attached as Exhibit 1 to the Auction Settlement Terms) is 11:00a.m. London time on Monday 23 April 2018.
For convenience, the Form of Customer Physical Settlement Request Letter and Form of Notice of Physical Settlement attached as Exhibit 2 and Exhibit 3, respectively, to the 2018 Noble Group Limited Credit Derivatives Auction Settlement Terms are set out below in Word format.
List of Participating Bidders: