Singapore regulators, police investigate commodity trader Noble ahead of rescue

Business | 20 Nov 2018 7:08 pm

Singapore-listed commodities trader Noble Group, which was founded in Hong Kong by Briton Richard Elman in the 1980s, is being investigated for suspected false and misleading statements, as well as breaches of disclosure requirements under the Securities and Futures Act, said the Commercial Affairs Department of the Singapore Police Force, the Monetary Authority of Singapore and the Accounting and Corporate Regulatory Authority today.

In a joint statement, the authorities said that the group's wholly owned subsidiary, Noble Resources International, is also under investigation for potential non-compliance with accounting standards under the Companies Act.

The commodity trader is just days away from completing a US$3.5 billion debt restructuring that would have staved off bankruptcy after years of crisis triggered by Iceberg Research’s claims that the company inflated profits, Bloomberg reports. Singapore’s market regulator says the revamp is now dependent on its review of the probe by the three agencies, though it remains unclear how it can delay the deal after giving approval in August.

An external spokeswoman for the company couldn’t immediately comment. A spokesman for the regulatory arm of Singapore Exchange Ltd. said the restructuring would depend on its review of the authorities’ investigation, including financial statements disclosed in the documentation underpinning the deal.

"CAD and MAS have directed Noble Group Ltd. and NRI to produce documents relating to the preparation of Noble Group’s financial statements, following a thorough review of other relevant information, including information referred to the authorities by the Singapore Exchange Regulation Pte Ltd. and other third parties,” the three agencies said. NRI refers to Noble Group unit Noble Resources International Pte.

Noble -- which is to be taken over by its senior creditors should the revamp be finalized as expected early next week-- has been dogged for years by claims that its accounts have been unreliable, especially in relation to the valuation of gains on some long-term contracts. Those accusations have routinely been denied by the trader and its executives, who’ve stood by the integrity of the book-keeping. The statement from the investigating agencies didn’t give details.

Iceberg, run by a Noble ex senior credit analyst called Arnaud Vagner, published a report in 2015 claiming that the trading house’s long-term contracts were probably overvalued by about US$3.8 billion. Since then, Noble has written down, or taken reserves against, more than that. "We were too conservative,” Vagner said in an interview earlier this year.

The Accounting and Corporate Regulatory Authority said it has notified NRI's board of directors about its findings of suspected breaches and has requested for more information from them as part of the ongoing investigation.

This follows an extensive review of NRI's financial statements for the financial years ended December 31, 2012 and December 31, 2016, according to the statement.

The Commercial Affairs Department and MAS have also directed Noble Group and NRI to produce documents relating to the preparation of Noble Group's financial statements, after a thorough review of other relevant information, which included that referred to the authorities by the Singapore Exchange Regulation and other third parties.

The announcement came a day after the shares in Noble Group, once Asia's top commodity trader, were suspended from trading amid the company's efforts to transform into an Asia-focused coal-trading business following the debt restructuring deal.

Noble said last week it had obtained the required approvals, including getting a go-ahead from courts for its restructuring and payment to creditors, clearing the final hurdle to completing its controversial debt-for-equity swap.

Under the lifeline provided by creditors, Noble was to halve its debt, in return giving 70 per cent ownership to the creditors, which are comprised mainly of hedge funds. The deal leaves existing equity holders with just 20 percent in the restructured firm.-Channel News Asia/ Bloomberg/Reuters

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