SINGAPORE (Aug 27): Noble Group Ltd faces a key shareholder meeting on Monday as the shrivelled commodity trader races to clinch a last-ditch US$3.5 billion debt restructuring deal to stay afloat and put a three-year crisis behind it.
Shareholders are being asked to support a debt-for-equity swap that will leave them with just 20% of the business. Multiple sources familiar with the matter say the proposal is expected to succeed.
The meeting is due to start at 2:30 local time (0630 GMT).
Noble, founded in 1986 by Richard Elman, who took advantage of a commodities bull run to build it into one of the world's biggest traders, has seen its market value all but wiped out from US$6 billion in February 2015.
The crisis started in February 2015 after Arnaud Vagner, a former employee, published reports anonymously under the name of Iceberg Research and accused Noble of inflating its assets. The upheaval triggered a share price collapse, credit downgrades, writedowns and asset sales.
Noble has always stood by its accounts.
Under a debt-for-equity swap agreed with a group of mostly hedge-fund creditors, the company's debt will be halved and it will get access to trade finance and hedging facilities — vital in a sector where profit margins are in the low single digits.
In return, Noble will hand over 70% of its restructured business to creditors, while existing shareholders' equity will be whittled down to 20% and its management will get 10%.
Noble has won the backing of 30% of its shareholders, including Elman, its former chairman. The company needs a simple majority of voters in attendance at Monday's meeting for the debt restructuring to go ahead.
Trading in Noble's shares was halted on Monday pending an announcement by the company.
Analysts say the company faces an uphill battle, with its loss widening to US$128 million in April-June from US$72 million a quarter ago.
"There's no evidence so far that the business is turning around," said Neel Gopalakrishnan, credit strategist at DBS Group. "Funding is the most important driver for this business and if a turnaround doesn't come, the company may find it difficult to retain funding lines," he said.
If the vote doesn't go its way, Noble will seek to implement a similar restructuring to keep it as a going concern but that plan does not provide for shareholders to receive any equity.