Noble was once Asia’s biggest commodity trader earning the name “mini-Glencore” by people in the industry. Noble now has another moniker, which will be revealed later in the story.
Noble Group Limited has reportedly reached a deal with creditors to restructure its US$ 3.5 billion in borrowings down to roughly US$ 1.7 billion, saving the debt-laden commodity trader from an ongoing three-year struggle that has brought it to the edge of bankruptcy. The company’s survival comes at the cost of its existing equity shareholders – including founder Richard Elman (18.3%), Goldilocks Investment Co. (owned by Abu Dhabi Financial Group at 8.1%), Prudential plc (9.9%) and the China Investment Corporation (9.6%) – who would see their collective stake reduced to a paltry 10% under the proposed debt-for-equity swap. Elman is being wiped down to 1.8% of the total shareholding. Perpetual bondholders would be even worse off, with a loss of 96.5% on their US$ 400 million investment.
Some Hedge Fund Support
A group of hedge funds representing some 30% of Noble’s current debt – namely Varde Partners Inc., Och-Ziff Capital Management LLC, Davidson Kempner Capital Management LLC, and Taconic Capital Advisors – has backed the arrangement, which would allow the Singapore-listed company to issue a US$ 700 million three-year trade finance facility supported by funds raised from the sale of its non-core oil and gas assets. These senior creditors will get 70% of the proposed restructured company. In addition to owning 70% of the newly-refurbished business, Noble’s creditors will also receive 2% of the face value of the debt they own as payment for their role in keeping the once-proud trader afloat, a 5% fee for underwriting the US$ 700 million trade facility, and US$ 180 million worth of preference shares in the unit controlling the company’s physical assets. Noble’s management team is being incentivized to back the deal with the promise of a 20% stake.
Noble’s remaining empire would thereafter be split into two entities: its primary trading operations centered around coal, freight, and liquid natural gas (LNG) in Asia, and a ring-fenced company responsible for overseeing its physical assets in Jamaica’s alumina industry and upstream energy investment vehicle Harbour Energy, Limited. Together, they are expected to generate between US$ 175 million and US$ 200 million in annual earnings before interest, tax, depreciation and amortization.
Fall From Grace
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Atlas Merchant Capital LLC and Singapore’s GIC Private Limited acquired just under a 25% equity stake in Dresher, Pennsylvania-based Ascensus, the largest independent recordkeeping services provider, third-party administrator, and government savings facilitator in the United States. San Francisco Genstar Capital LLC and New York-based Aquiline Capital Partners LLC were the sellers of the shares in Ascensus and will maintain control over the company.
Atlas Merchant Capital LLC was founded by Bob Diamond and David Schamis. Diamond is the former group chief executive of Barclays plc.
GIC is an investor in Alight Solutions, a provider of human capital solutions.
Barclays acted as the lead financial advisor and J.P. Morgan acted as financial advisor to Ascensus in connection with this transaction. Willkie Farr & Gallagher LLP acted as legal counsel to Ascensus.
Debevoise & Plimpton LLP acted as legal counsel to Atlas Merchant Capital and Sidley Austin LLP acted as legal counsel to GIC.
In 2015, JC Flowers sold Ascensus to Genstar Capital and Aquiline Capital Partners.
The Value of Research: Skill, Capacity, and Opportunity
This article is sponsored by S&P Dow Jones Indices.
How much should a portfolio manager be willing to pay for research? The question is of importance to any manager, but has become particularly pertinent since newly imposed European rules require that the costs of investment research—previously offered by many investment banks as an in-kind consideration in return for brokerage business—be unbundled from trading.
Unfortunately, attempts to determine a fair value for research in the most general circumstances are doomed to fail. Even if we only consider direct recommendations to buy or sell certain securities, the value of such recommendations to a portfolio manager will vary according to the absolute size of positions taken in response. Instead, we provide a framework for estimating relative research values across markets and constituents, under certain stylized (but reasonable) assumptions.
REPORT: The Value of Research: Skill, Capacity, and Opportunity
Malaysia’s Khazanah Nasional Berhad is prepping to declare more than 1 billion MYR in a dividend payout to the Malaysian government for 2019. Khazanah Nasional is undergoing a significant strategy shift to focus more on domestic assets, while selling off venture tech investments, overseas real estate, fund investments, and other non-strategic assets. The wealth fund also plans to scale back its overseas presence in markets such as San Francisco and London.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
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