(Bloomberg) -- Embattled commodity trader Noble Group Ltd. reached a deal with dissident shareholder Goldilocks Investment Co. over its planned $3.5 billion debt restructuring, agreeing to boost the holding in the new company that stock investors stand to get. The shares surged.
Existing shareholders will now receive 20 percent of the revised company, up from 15 percent, according to an exchange statement on Wednesday. In addition, the two parties will drop all claims against one another, with Noble Group paying Goldilocks as much as $5 million to its cover legal costs.
The deal marks a breakthrough after months of increasingly bitter public sparring between Noble Group and Goldilocks, and it paves the way for a restructuring that’ll see control handed to senior creditors. Goldilocks has given its irrevocable support to the revised agreement, which already has the backing of founder Richard Elman. Noble and Goldilocks will form a partnership to explore opportunities in the Middle East, according to the statement.
“This absolutely clears the biggest hurdle to the debt restructuring,” Stan Manoukian, founder of California-based Independent Credit Research LLC, said by phone. “The threat of liquidation is no longer on the agenda. If Goldilocks had not played ball, the value of equity would be zero in a liquidation scenario. We expect the bonds to be worth more than where they are trading now.”
To get the deal over the line, Brough needs approvals from shareholders as well as creditors, of which about 85 percent are backing the plan. The company is working on a circular to send to stock holders, before a special general meeting that’s yet to be scheduled.
Getting Sweeter
The restructuring agreement has been altered before. Earlier this year, Noble Group sweetened the deal for shareholders by revising the original plan, offering them the 15 percent holding, up from 10 percent. Under the latest deal, Goldilocks will get to nominate a director to the board.
Noble Group’s shares, which had been suspended ahead of the announcement, surged. The stock rallied as much as 57 percent to 8.5 Singapore cents and traded at 8 cents at 9:29 a.m. in Singapore. The shares remain 60 percent lower this year.
“By reaching agreement with Goldilocks, the company is now able to move into the final stages of its restructuring,” Chairman Paul Brough said. “The strategic partnership agreement announced today will create real opportunities for New Noble in the Middle East.”
Years of Crisis
The remaining equity in the new company is being split between senior creditors and management. Under the latest deal, senior creditors stand to receive 70 percent of the trader, while management’s share will be 10 percent.
Noble Group has been in crisis for years after billions in losses, defaulting on its debt, and allegations of improper accounting, which it has rejected. After a string of asset sales, the company has been reduced to a rump business focused on Asia, plus a handful of other assets including an alumina refinery.
“Obstacles to the completion of the restructuring are probably getting removed,” said Neel Gopalakrishnan, senior credit strategist at DBS Group Holdings Ltd. “But the key question is still whether, post restructuring, the company will be able to turn around operations for creditors to recover value.”
(Updates to add analyst’s comment in final paragraph.)
