Goldilocks finds distressed energy companies just right

Investment company builds a portfolio of companies facing financial difficulties as it snaps up a stakes in Noble Group

Richard Elman founded Noble Group, which is based in Hong Kong, in the 1980s. It has lost more than 90 per cent of its market value since 2011. Bobby Yip / Reuters

The Goldilocks Investment Company, a fund set up last year by Jassim Alseddiqi’s Abu Dhabi Financial Group (ADFG), has struck again, snapping up a stake in troubled Noble Group, as it builds a portfolio of companies facing financial difficulties.

Goldilocks bought more than 50 million shares in commodities trader Noble last week, adding to a previous holding to bring its total stake in the company to 66 million shares, or just above 5 per cent, according to a filing with the Singapore Exchange (SGX).

The previous week, the Goldilocks fund said it had bought 5 per cent of Sharjah-based Dana Gas, which is in the middle of a cash crunch because of large arrears built up with the governments of Egypt and the Kurdish region of Iraq, where its main assets are located. It is also locked in a legal battle with sukukholders over how to deal with US$700 million coming due this year, which Dana Gas has said it is unable to pay on time.

Noble Group, a Hong Kong-based, SGX-listed diversified commodities trader founded in the 1980s by British businessman Richard Elman, has lost more than 90 per cent of its market value since 2011, when it was valued at around S$14 billion (Dh37.06bn).

Noble’s shares, which nearly reached S$17 six years ago, hit a low of S$0.28 earlier this year; the company currently is valued at around S$700m, with its shares closing last week at S$0.53.

The group had been ranked among the world’s largest trading groups – such as Glencore and Vitol – but like them was hit hard by the commodities downturn. Its problems were exacerbated by aggressive use of mark-to-market accounting which did not adequately reflect the company’s risks, according to analysts, particularly former Noble employee Arnaud Vagner of Iceberg Research.

Noble has also suffered a series of credit rating downgrades in the last two years, with Standard & Poor’s cutting it from B+ to CCC+ last month, indicating a high degree of risk.

Last week, a few days before Goldilocks’ share purchase, Noble agreed to a financing extension with a group of banks in the hope of finding a new strategic investor after China’s state-controlled petrochemicals group, Sinochem, lost interest in taking a stake, according to local media reports.

Mr Vagner has noted, however, that talk of a strategic investor coming in to support Noble Group has been around for two years but has failed to bear fruit.

Goldilocks’ parent, ADFG, is a $5bn alternative assets ­investment group. According to the ­filing with the SGX, the company acting for Goldilocks was ADCM Altus Investment Management, whose principal owner is ADFG.

Goldilocks has grown from an initial seed funding of Dh100m in July 2015 to about Dh1.3bn and the return on the fund since its launch is 397 per cent, Mr Alseddiqi said in an interview with The National in March.

Its parent ADFG is the majority stakeholder in the Dubai investment bank Shuaa Capital, the biggest investor in Bahraini Islamic investment group GFH and the second-largest shareholder in Abu Dhabi’s Eshraq Properties.