Date: January 30, 2018
The response to Noble’s restructuring proposal has been one of disappointment by shareholders and noteholders. Understandably, the gripe is due to the steep cut in the shareholding and the unusual treatment accorded to the Management.
We note that Noble has reached in-principle agreement with an ad hoc group of the Group’s senior creditors for a restructuring of the Group’s existing debts which would help to facilitate its business viability. It has taken some time for this news by Noble Group.
However, the proposed debt-to-equity swap will result in a steep dilution of existing shareholders’ interest post-restructuring. In contrast to Noble’s management team, who would ultimately own 20% of the new company to be formed as part of the restructuring, existing shareholders would only own 10%, half of the shares to be given to management. Why? It would be no exaggeration to say that the bondholders would also be not happy with the debt-to-equity swap. Nevertheless, management will be given their first 10%, same as existing shareholders, on the restructuring effective date without any consideration and with no KPIs. The second 10% to management will be funded by creditors, interest-free for five years.
Creditors and shareholders would be scratching their heads as to why the special treatment for the management. What is the basis for the special treatment of the management? There is a perception amongst shareholders and creditors that the management should take responsibility for the current predicament of the company. What is their pain? On the other hand, what is the alternative, maybe liquidation?
Shareholders cannot be blamed, if they believe, this proposal is unfair and grossly disadvantageous to them, many of whom have been patient and have suffered the woes of the Noble Group for the past few years. Why couldn’t the restructuring offer existing shareholders a similar deal as that to management?
It appears that Noble’s board is clearing the way for strategic investor who will be expected to put in the dollars. However, there are questions that are worrying shareholders. For instance, what is the return for shareholders, surely there will be further dilution, they feel, notwithstanding the upside for them in such an event.
We urge the Noble Board to communicate the answers to the above questions lingering in the minds of bondholders and shareholders who seriously are questioning the restructuring proposal and are hoping to get a more equitable share of the already diminished and diluted group.
Founder, President & CEO
Securities Investors Association (Singapore)