Singapore-listed Noble Group Ltd (NOBG.SI) faces a make-or-break shareholders' meeting on Monday as investors vote on a $3.5 billion debt restructuring plan that its creditors and board say is vital to prevent insolvency.
The company, once a global commodity trader with ambitions to rival Glencore (GLEN.L) or Vitol, has shrunk to an Asian-centric business focused on coal and freight trading after it slashed hundreds of jobs and sold prized assets to cut debt.
Noble, whose market value has been nearly wiped out from $6 billion in February 2015, is expected to win the required simple majority of voters in attendance at the meeting, said multiple sources familiar with the matter. Equity owners include China Investment Corp and Abu Dhabi fund Goldilocks Investment Co Ltd.
Noble did not immediately respond to a request for a comment on the vote.
Noble already has majority support from its creditors and the backing of 30 percent of its shareholders such as founder Richard Elman, who stepped down as chairman last year.
Under the debt-for-equity swap, it plans to halve its debt after surrendering 70 percent of control to its senior creditors, mainly made up of hedge funds, while existing shareholders' stakes will dwindle to 20 percent and its management would get 10 percent.
"The expectation is for the restructuring to be passed as Noble needs a simple majority at the meeting," said Neel Gopalakrishnan, credit strategist at DBS Group. "It would come as a big surprise if it doesn't come through."
Noble's accounting came under scrutiny in February 2015 when a former employee, Arnaud Vagner, started to publish reports anonymously under the name of Iceberg Research, alleging Noble inflated the prices of derivative contracts the company held to appear more profitable. Noble has always stood by its accounts.
As Noble's shares and bonds plunged after the allegations, the company lost its investment grade rating, took billions of dollars in impairment losses and lost access to funding. It also changed its chief executive officers.
Desperate to slash debt, Noble sold a string of assets but this was not enough to run a trading business where profit margins are tiny. It posted a record $4.9 billion loss for 2018 and then defaulted on its debt in March.
"It's just impossible in commodity trading to operate with so high interest costs. It is what people are once again going to realize," Vagner told Reuters, referring to the restructured Noble.
"Is the new team more competent than the previous one? No: It's the same. The share price is down 99 percent with this management," he said by email.
Noble's restructuring plan gained ground in June 2018 after it won over a key shareholder with a sweetened offer.
If Noble does not obtain shareholders' approval, it will seek to implement a similar restructuring to keep the firm as a going concern but that plan does not provide for shareholders to receive any equity in the new company.
Analysts are still wary of the new company's prospects.
"While its current debt problems will be temporarily fixed post-restructuring, it will need ready access to trade financing which is critical to its business," said Brayan Lai, analyst at Bondcritic, who publishes on independent research platform Smartkarma.
Noble's ability to make profits on a sustainable basis would be the main challenge for its remaining business, said Annisa Lee, head of Asia ex-Japan's flow credit analysis at Nomura.