Crunch time for Noble Group with $3.5bn restructuring vote today

Shareholders meeting on Monday with battered commodity trader making last-gasp effort to stay afloat after three years of crisis

Noble Group founder Richard Elman. The firm faces crucial vote today on its future. Reuters

Noble Group, in whom Abu Dhabi fund Goldilocks Investment is a shareholder, faces a key shareholder meeting on Monday as the shrivelled commodity trader attempts to clinch a last-ditch $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 ownership of just 20 per cent of the business. Multiple sources say the proposal is expected to succeed.

The meeting was due to start at 2:30pm Hong Kong time (10.30am UAE).

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 had its market value all but wiped out from $6bn in February 2015.

The crisis started that month after Arnaud Vagner, a former employee, published reports anonymously under the name of Iceberg Research that accused Noble of inflating its assets. The upheaval triggered a share price collapse, credit downgrades, writedowns and asset sales.

Singapore-listed Noble has always stood by its accounts.

Under a debt-for-equity swap agreed with a group of creditors comprised mainly of hedge funds, 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 per cent of its restructured business to creditors, while existing shareholders' equity will be reduced to 20 per cent and its management will get 10 per cent.

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Noble chairman Paul Brough, a restructuring and liquidation expert, says shareholder support is key to prevent the company's insolvency.

Noble has won the backing of 30 per cent of its shareholders, including Mr Elman, its former chairman, and only needs a simple majority of the voters in attendance at the meeting for the debt restructuring to go ahead.

Aside from Goldilocks, Noble's shareholders include sovereign wealth fund China Investment, Eastspring Investments and retail investors.

Trading in Noble's shares was halted on Monday pending an announcement by the company.

In its glory days, Noble employed hundreds of traders, with ambitions to rival competitors like Glencore but it had to sell off prized assets, including its oil and gas units, to rivals Vitol and Mercuria.

Analysts say Noble still faces an uphill battle, with its losses widening to $128 million during the April to June quarter from $72m in the first quarter.

"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."

If the vote does not go its way, Noble will seek to implement a similar restructuring plan to keep it as a going concern but current shareholders would not receive any equity under that plan.