(Mar 26): Noble Group’s Richard Elman resigned as a non-executive director as the commodity trader he founded decades ago struggles to secure its survival, with his decision announced a day after the firm slid into default.
The departure of Elman, who remains the top shareholder, was given in a statement to the Singapore Exchange on March 21. The move was effective on March 20, the same day that S&P Global Ratings cut Noble’s credit grade to a level signifying default after it failed to pay a bond.
“For investors, this could resemble a captain- abandoning-ship scenario” that hurts confidence, according to Jingyi Pan, a market strategist at IG Asia. The bigger issue remains the survival of the company, and the more immediate concerns about the debt restructuring, Pan says in an email.
Noble, once Asia’s largest commodity trader, has been locked in a crisis for the past three years. After billions in losses, selling assets around the globe and parrying criticism of its accounts, chairman Paul Brough is now racing to push through a restructuring that will hand control to creditors. Elman’s move means he will not be on the board as the company’s fate is decided.
“The company has been attempting to fend off issue after issue in the past few weeks,” Oriano Lizza, a sales trader at CMC Markets, says in an email. The resignation is not surprising, according to Lizza, coming on the heels of S&P’s downgrade, a lawsuit this past week from top shareholder Goldilocks Investment, and stake sales by other equity holders.
The departure may be a case of “walking before being pushed”, according to Lizza. An effort to contact Elman through an external company representative in Singapore was not successful.
Elman, 77, started the business in 1980s Hong Kong as a middleman supplying Chinese steelmakers, and turned it into a conglomerate operating assets the world over — mines in Australia, sugar mills in Brazil, American fuel terminals — before the crisis hit. The company was named after James Clavell’s 1981 novel Noble House, a fictional tale of a colossal trading enterprise.
On March 20, Elman was named among defendants in a lawsuit filed by Goldilocks in the Singapore High Court that alleges the trader inflated profits to raise money. In a statement on March 21, the company confirmed it had been served a writ of summons by Goldilocks and said it “intends to vigorously resist any and all allegations or claims made against it”.
The suit alleges managers paid themselves inflated salaries, then attempted a cover-up when the accounts came under increased scrutiny. As well as Elman, the defendants include Brough, CEO Will Randall and chief financial officer Paul Jackaman. Goldilocks is seeking relief from Hong Kong-based Noble on behalf of shareholders, including about US$169 million ($222 million) paid to executives between 2011 and 2017, as well as any interest and damages assessed by the court, according to the lawsuit. The 72-page filing cites allegations made by long-time critic Iceberg. Goldilocks also wants a declaration from the court that the defendants breached their fiduciary duties.
A few hours after the resignation was announced, Goldilocks welcomed the move, describing it as potentially a “new dawn” for the company, while at the same time querying whether Elman is due any further compensation, and highlighting the implications for the makeup of the board.
With Elman’s decision, and David Eldon’s plan to leave at the next annual general meeting, “the composition of the remaining board is no longer in line with the principles laid in Singapore’s Code of Corporate Governance,” it said. “With the departures, the board will only be served by two independent directors.”
As Noble’s crisis has deepened, Elman has progressively stepped back from his role at the Hong Kong-based company, which posted a loss of almost US$5 billion last year. Latterly, he has held the title of chairman-emeritus.
The statement indicated that there are no unresolved differences of opinion between Elman and the board on material matters.
Under the restructuring plan led by Brough, existing shareholders including Elman will see their holdings reduced. In revised terms announced earlier this month, equity holders could get a 15% stake in the revamped business. At present, Elman holds 18%.
After Elman’s resignation was announced, and as investors weighed the prospects for the trader’s survival, Noble shares dropped as much as 12% to 10 cents. The stock closed at 10.4 cents, valuing the company at about $138.1 million. At its peak, Noble had a market value of more than $10 billion.
