People
&Markets
Noble sets
restructuring
deadline
NOBLE GROUP said last Monday that it
WASûINûTHEûlNALûSTAGESûOFûITSûDEBT
TO
equity restructuring, as the beleaguered
commodities trader seeks to draw a line
UNDERûITSûDIFlCULTIESûOVERûTHEûLASTûTHREEû
years.
Noble said it was due to introduce
parallel schemes of arrangement in
England and Bermuda on September 21, a
precursor to handing control of a revamped
trading company to its creditors. At the
TIMEûOFûWRITING ûITûHADûNOTûYETûCONlRMEDû
that it had signed the articles and a
spokesperson declined to comment.
Noble also released a letter from
representatives of its creditors that sought
to provide assurances that the new company
would adhere to tough standards of
corporate governance following criticisms of
the group’s accounting practices.
The creditor group said that it was
currently recruiting members of a new
board that will hold the company to tough
governance standards and complete a
review of risk management and accountingpractices.
In an apparent nod to long-time critic
Iceberg Research, an independent research
house led by former Noble credit analyst
Arnaud Vagner, the ad hoc group of
creditors (AHG) sought to dispel accusations
THATû.OBLEûHADûINmATEDûASSETSûANDûSOMEû
contracts and backed earlier reports from
the group’s external assessors.
h4HEû!('ûANDûITSûlNANCIALûADVISERSû
CONDUCTEDûAûlNANCIALûANDûBUSINESSû
DILIGENCEûEXERCISEûGIVINGûSPECIlCûATTENTIONû
to matters raised by public critics,” the
creditors said.
“As part of this review, the AHG accepted
THEû%RNSTûû9OUNGûAUDITûOPINIONS ûTHEû%9û
AUDITEDûHISTORICALûlNANCIALûSTATEMENTSûANDû
the PwC report on accounting policies at
face value.”
The creditors said that the restructuring
would result in the transfer of most of the
assets of Noble Group to a new Bermuda-
based company with the old company
SUBSEQUENTLYûlLINGûFORûBANKRUPTCY
The new company will focus on a limited
number of market segments such as coal,
LNG and aluminium, where the company
HASûHISTORICALLYûBEENûTHEûMOSTûPROlTABLE
Noble, which has been plagued by
losses and defaults over the past few years,
lNALLYûWONûSHAREHOLDERûAPPROVALûFORûITSû
restructuring last month.The restructuring, which will halve
Noble’s debt burden, will see creditors get
around 70% equity in the new company.
After initial opposition from some large
shareholders including Abu Dhabi-
based Goldilocks Investment, existing
shareholders will get 20% and Noble’s
management 10%.
The restructuring was voted through by
99.96% of shareholders even though Noble
only required a majority. Creditors holding
86% of its senior debt had already agreed to
the restructuring proposal.
Last week, Iceberg Research said a group
of perpetual bondholders had joined a
lawsuit it was preparing against Noble. The
RESEARCHûlRM ûWHICHûDIDûNOTûPROVIDEûDETAILSû
OFûTHEûCLAIMS ûSAIDûTHATûLAWûlRMû,OCKEû,ORDû
would represent the interests of the perp
holders.
David Grant, a London-based lawyer at
,OCKEû,ORD ûSAIDûTHATûTHEûlRMûHADûNOTûYETû
been formally retained and Iceberg was
coordinating claims at present.
Last Thursday, Noble said in a stock
exchange release that it had not been
served with any formal action. It added that
it would “vigorously” defend the company
against any lawsuit and that any claim
would not affect the restructuring.
THOMAS BLOTT
(Additional reporting by Daniel Stanton)India to merge
three state-
owned banks
India plans to merge state-run BANK OF
BARODA, DENA BANK and VIJAYA BANK as part of
efforts to tackle the bad loans plaguing the
banking sector and revive credit growth.
The government will continue to provide
capital support to the merged bank, which
is expected to be India’s third largest with
ASSETSûOFû2STRNû53BN ûlNANCIALû
services secretary Rajeev Kumar told
reporters.
Finance minister Arun Jaitley called
the plan “a major economic, commercial
decision.”
The government owns majority stakes
in 21 lenders, which control more than
two-thirds of the country’s banking assets.
These banks also account for the lion’s
share of more than US$150bn in bad debts
and need billions of dollars in new capital
in the next two years to meet global BaselIII capital regulations.
The decision to merge the three banks
WILLûlRSTûNEEDûTOûBEûAPPROVEDûBYûEACHûOFû
their boards of directors, Jaitley said, after
which the government will prepare an
amalgamation scheme.
This will require the approval of the
cabinet and parliament – a process he expects
to be completed by the end of March 2019.
The new bank is expected to have a net
non-performing asset ratio of 5.71% of its
total assets, nearly 9,500 bank branches and
85,675 employees.
“Merging the three banks will give the
NEWûENTITYûBENElTSûOFûECONOMIESûOFûSCALEû
and distribution,” said Sunil Sharma, chief
INVESTMENTûOFlCERûATû3ANCTUMû7EALTHû
Management.
“But a lot will depend on the
management of the larger entity and what
the synergies will be,” he said.
Bank of Baroda’s shares fell as much as
14.2% on last Tuesday, their steepest fall in
over three years, in response to the merger
plan. Shares of Dena Bank and Vijaya
Bank rose sharply as the smaller peers are
EXPECTEDûTOûBENElTûFROMûTHEûMERGERThe proposed merger is the latest in
a series of measures introduced by the
government to cut bad loans in the banking
sector.
India introduced a new insolvency
process in 2016 to speed up debt recoveries
and restructurings and in February 2017
approved the merger of State Bank of India
WITHûITSûlVEûSUBSIDIARYûBANKS ûHELPINGû
the country’s largest lender by assets cut
expenses.
In August last year it also approved the
creation of a ministerial panel to speed up
the consolidation of other state-run banks.
“Over time, this (merger) will strengthen
the global positioning of Indian banks,
but there will be a considerable transition
period for this,” said Sujan Hajra, chief
economist and head of research at Mumbai-
based broker Anand Rathi.
Moody’s said that the proposed merger
WASûCREDITûPOSITIVE ûCITINGûEFlCIENCIESûOFû
scale and improved corporate governance.
It said that it expects the entity to require
capital support from the government.
MANOJ KUMAR
(Additional reporting by Krishna Merchant)