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Noble Group's Founder Retires, Leaving Behind a Firm in Turmoil -- Update

21 Mar 2018 11:06 am
By Saurabh Chaturvedi 

SINGAPORE--It's not the retirement of which 77-year old Richard Elman, the founder of commodities trading house Noble Group Ltd., would have dreamed.

Mr. Elman's Wednesday resignation as a non-executive director of the Hong-Kong based firm he founded three decades ago comes as Noble, struggling with high debts and a collapse in its share price, faces an existential crisis.

He first announced plans to resign as executive chairman in 2016, stepping down from that position the following year and assuming the role of a non-executive director.

His final departure now comes after Noble last week inked a debt restructuring agreement with its key creditors, with the aim of halving its $3.4 billion of debt. The company now has a market value of around $100 million, compared with over $11 billion at its peak in 2011.

That plan, which will severely dilute Noble shareholders' equity--almost erasing Mr. Elman's 18.3% stake--has been challenged by another key shareholder, Goldilocks Investment Co. Ltd., a part of Abu Dhabi Financial Group.

Goldilocks, which bought an 8.1% stake in Noble last year, filed a lawsuit on Tuesday in the Singapore High Court against Noble and its executives, including Mr. Elman. It alleged that the firm inflated earnings to raise funds and also failed in its fiduciary duties, according to a copy of the writ of summons seen by The Wall Street Journal.

In a statement, Noble said it is consulting with its legal advisors over the lawsuit and it intends to "vigorously resist any and all allegations or claims made against it."

Goldilocks said in a statement that Mr. Elman's departure can be seen as "a new dawn and opportunity" and may be the stepping stone towards the "revival of a fairer restructuring" plan with new independent directors on the board.

It added that it was assessing a possible new management team, and would be looking to propose replacements.

"He's had a good run while it lasted," Brayan Lai, an analyst at credit research firm Bondcritic, said of Mr. Elman. "To be candid, I think he has made enough money in his tenure. His old company is being dismantled to its former roots and he is 77, he is not going to stick around any longer than he should."

Mr. Lai said investors should focus on the fate of the restructuring plan, which Noble aims to complete by July. But the lawsuit is "definitely a complication and could potentially stall the restructure," he added.

Mr. Elman, a former British scrap metal trader who left school at age 15, had in recent decades become one of a handful of energetic leaders whose names have became synonymous with powerful but often little-understood commodities trading firms.

Others include Ivan Glasenberg, chief executive of Switzerland-based Glencore PLC, and Ian Taylor, the boss of Swiss oil trader Vitol.

These men built their companies up alongside the boom in global commodity prices in the early 2000s.

But Noble has been battered by accusations of accounting irregularities, first leveled in early 2015 by an anonymous blogger known as Iceberg Research, whom Noble claims is a disgruntled former employee. Th firm has denied the allegations.

In a little over two years, it has sold off several major assets and suffered a collapse in its share price. Its long-term issuer credit rating was downgraded to D--essentially default grade, from CC by S&P Global Ratings late Tuesday.

Write to Saurabh Chaturvedi at Saurabh.Chaturvedi@wsj.com
 

(END) Dow Jones Newswires

March 21, 2018 07:06 ET (11:06 GMT)

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