Noble Group Ltd. is preparing for an insolvency filing after Singaporean regulators blocked a key element of its USD3.5 billion debt restructuring, according to people familiar with the matter.
The company is considering what’s known as a “pre-pack” administration, a procedure that allows for a debt restructuring in court through a pre-agreed plan with creditors, one of the people said, asking not to be identified because the talks are private.
Noble said in a circular in August that the alternative restructuring, or Plan B, would involve filing for administration in the U.K. It is still considering different jurisdictions for the filing, including Hong Kong, Bermuda, and Singapore, according to one of the people. The plans are still under discussion and could change.
The discussions come after Singaporean regulators said they wouldn’t allow Noble to relist as a new entity, effectively blocking an intricate debt restructuring plan that has been more than a year in the making.
The once giant commodity trader has been brought to the brink of collapse by accusations of inflated profits, first made by Iceberg Research in 2015. After posting huge losses and billions of dollars of writedowns, Noble pinned its hopes for survival on a restructuring masterminded by Chairman Paul Brough.
In August, Noble laid out plans for an alternative restructuring if its first choice failed. Under that scenario, it would file for administration in the U.K and the creditors would then aim to swiftly take control. The shareholders and perpetual bondholders could be wiped out.
The collapse of Noble’s first-choice restructuring plan would be a blow to its creditors, including hedge funds Taconic Capital Advisors, Varde Partners and Owl Creek Asset Management, as well as Deutsche Bank AG and ING Groep NV.
It’s likely that they would take control of the company’s assets if it files for administration, according to the August shareholder circular. But there are still risks: for example, the move could trigger clauses allowing some counterparties to walk away from supply contracts, making it harder for Noble to stay in business.
In August, the company said that it preferred a consensual restructuring deal that “avoids the disruption to Noble Group’s business in a formal insolvency procedure.”
The Singaporean probe could continue to affect Noble even if it ceases to be a public company. On Thursday, the authorities said there were “significant uncertainties about the financial position of New Noble.”
In previous comments, Singaporean regulators have said they’re looking at accounting issues at Noble’s Singapore subsidiary from 2012 to 2016. The directors of that unit during the period include Will Randall and Paul Jackaman, the current chief executive and chief financial officer. Under the restructuring plan, they were due to continue their roles. Jack Farchy, Javier Blas and Luca Casiraghi, Bloomberg