Noble Group Ltd

JurisdictionEngland & Wales
CourtChancery Division
JudgeMr Justice Snowden
Judgment Date02 Nov 2018
Neutral Citation[2018] EWHC 2911 (Ch)
Docket NumberCase No: CR-2018-008453

Neutral Citation Number: [2018] EWHC 2911 (Ch)




Royal Courts of Justice

7 Rolls Building

Fetter Lane, London EC4A 1NL


Mr Justice Snowden

Case No: CR-2018-008453

In the Matter of Noble Group Limited
And in the Matter of the Companies Act 2006

William Trower QC, Henry Phillips and Lottie Pyper (instructed by Kirkland & Ellis International LLP) for the Company

David Allison QC and Stephen Robins (instructed by Akin Gump LLP) for the members of the “Ad Hoc Group” of Scheme Creditors

Hearing dates: 12, 15 and 16 October 2018

Judgment Approved

Mr Justice Snowden

These are my reasons for acceding on 16 October 2018 to an application by Noble Group Ltd (the “Company”) for an order pursuant to section 896 of the Companies Act 2006 (the “2006 Act”) convening meetings of its Scheme Creditors (as defined below) for the purposes of considering and, if thought fit, approving a proposed scheme of arrangement between the Company and the Scheme Creditors (the “Scheme”).


The Company is incorporated and has its registered office in Bermuda, and is listed on the mainboard of the Singapore Exchange (“SGX”). It is the ultimate holding company of a group of companies (the “Group”) which are a major global commodities trader. In recent years the Group has encountered financial difficulties caused, among other things, by the industry-wide decline in commodity prices between 2014 and 2016.


As I will explain, the Company has defaulted on its main financial obligations. A liquidation analysis conducted by KPMG with an assumed liquidation date of 31 March 2018 estimates that returns to the Company's unsecured creditors would range between 19.5 and 30.3 cents in the US dollar. The Company's financial position has not changed materially since 31 March 2018, although by 30 June 2018 its balance sheet position had further deteriorated from US$(902) million to US$(1,030) million.

The Restructuring and the Scheme in outline


The Scheme is part of a broader and highly complicated restructuring of the Group (the “Restructuring”). The key feature of the Restructuring for present purposes is that on the “Restructuring Effective Date” (or “RED”), all of the Company's business and assets will be transferred to two subsidiaries (a “New Trading Co” and a “New Asset Co”) of a newly incorporated company, Noble Group Holdings Limited (“New Noble”).


New Noble will be majority (70%) owned by a special purpose vehicle (the “Senior Creditor SPV”) for the unsecured Scheme Creditors whose claims might amount to between about US$3.5 billion and US$4.2 billion and who would be entitled to a return in a liquidation of the Company. The remaining 30% of the equity in New Noble will be allocated to the existing shareholders of the Company (who will be entitled to 20% of the equity) and a special purpose vehicle for the existing management of the Company (which will hold 10% of the equity). At the RED, the listing status of the Company will be transferred to New Noble such that New Noble will be listed on the SGX and the Company will no longer be listed.


The Scheme Creditors comprise substantially all of the Company's creditors. The majority of Scheme Creditors are finance creditors holding existing debt instruments issued by the Company (the “Finance Creditors”). However, they also include a limited number of other persons who have made or asserted claims against the Company in contract or tort (the “Other Scheme Creditors”).


The Scheme does not extend to the holders of a class of subordinated debt instruments issued by the Company which are known as “Perpetual Capital Securities” and upon which about US$436 million in principal and interest is due. It is said that these instruments would be “under water” and would not receive a return in a liquidation of the Group. Pursuant to the wider Restructuring, the holders of these instruments are, however, to be offered the opportunity to exchange their existing debt instruments for US$25 million of new subordinated debt instruments to be issued by New Noble. The Scheme also excludes certain other claims and does not extend to one major financial creditor of the Company, ING Bank NV (“ING”). ING supports the Restructuring and has agreed to enter into bilateral arrangements with the Company. It is generally for a scheme company to decide with whom it wishes to propose a compromise or arrangement (see SEA Assets v PT Garuda [2011] EWCA Civ 1696 and Re SABMiller plc [2016] EWHC 2153 (Ch)) and no objections have been taken to these aspects of the Scheme.


Under the Scheme, the Scheme Creditors will be required to submit their claims and supporting documents before a “Bar Date” two months after the Scheme has become effective. The claims will then be subjected to a claims determination process that has been modelled on the manner in which such claims would be determined against the Company in a liquidation in England. In the first instance, the claims will be assessed by the Scheme Administrators, who are accountants at KPMG, and who will apply the same approach as if they were determining whether the claims should be admitted to prove in a winding up.


Where claims are rejected in whole or in part, the Scheme Administrators will notify the claimant and give reasons. There will then be a 21-day period during which the Scheme Administrators and the claimant can seek to reach agreement, failing which the Scheme Creditor will have three business days in which to refer their Scheme Claim to an independent Adjudicator, who will either be a retired Court of Appeal judge (Sir Bernard Rix) or a QC (Nicholas Vineall QC) or some other individual or individuals of comparable qualification who are impartial and independent of the Company. The Adjudicators are given broad powers to manage the claims determination process, will consider the disputed claim de novo, and may (but are not obliged to) give reasons for their decisions, which will be final and binding insofar as is permitted by law.


Scheme Creditors whose claims are accepted will receive a combination of new debt instruments to be issued by subsidiaries of New Noble. They will also receive shares in the Senior Creditor SPV which, as indicated above, will hold 70% of the equity in New Noble. If the Restructuring is successfully implemented, the proponents of the Scheme anticipate that New Noble and its subsidiaries will be able to service all of the new debt instruments in full in accordance with their respective terms. The Scheme Creditors will also have the potential, if all goes well, to recover value through the equity interest in New Noble which will be held on their behalves by the Senior Creditor SPV.


A key feature of the consideration to be provided to Scheme Creditors by way of new debt instruments is that it takes three forms. All Scheme Creditors will be entitled to a proportion of US$290 million of bonds to be issued by an intermediate holding company of the New Trading Co (the “Basic Creditor Scheme Consideration”). Because they are issued by an intermediate holding company, those bonds will, however, be structurally subordinated to about US$ 1.2795 billion of new bonds which will be issued by the New Trading Co itself and by the New Asset Co (the “Priority Debt”). The amount of a Scheme Creditor's entitlement to Priority Debt will reduce the amount of the Basic Creditor Scheme Consideration to which it is entitled.


Crucially, however, the Priority Debt will only be issued to Scheme Creditors who elect to “risk participate” by agreeing to guarantee US$700 million of new trade finance and hedging facilities (the “New Money Debt”) which are required by the New Noble group (the “Participating Creditors”). Under the Scheme there are two routes through which Participating Creditors can risk participate: through entering into an agreement with an Intermediary Bank or by subscribing cash for shares in a special purpose company formed for the purpose (the “Cash SPV”). Those who elect to participate through the Cash SPV will be required to provide cash upfront to the amount of their risk participation. For a Scheme Creditor electing to risk participate via an agreement with an Intermediary Bank, the extent to which that Scheme Creditor will have to provide cash upfront to fund its risk participation will be a matter to be agreed bilaterally between that Scheme Creditor and its Intermediary Bank.


The financial effect of this structure upon potential returns to Scheme Creditors is very significant. According to the Explanatory Statement, depending upon the assumptions that are made as to the level of the Other Scheme Creditors that are accepted, Moelis has calculated that a non-Participating Creditor can expect to receive between 24.7% and 33.8% of its accepted Scheme Claim, whereas a Participating Creditor who elects to risk participate will receive between 47.4% and 58.4% of its accepted Scheme Claim for a risk participation of between 14.7% and 18.2% of its accepted Scheme Claim.


In addition to the Basic Creditor Scheme Consideration and the Priority Debt, one Scheme Creditor, Deutsche Bank AG (“Deutsche Bank”), will be issued with superior notes which rank ahead of the New Money Debt in respect of the first US$58 million of its Scheme Claim. The remainder of its claim will be treated in the same manner as other Scheme Claims.

The Issues


The main issues for decision at this convening stage related to the appropriate composition of the classes of Scheme Creditors for the purpose of the meeting or meetings to consider and approve the Scheme (the “Scheme Meeting(s)”), and as to the appropriate timetable for the convening and holding of that meeting or meetings.


In particular, in relation to classes, I had to decide whether it is appropriate for...

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10 cases
  • Noble Group Ltd
    • United Kingdom
    • Chancery Division
    • 14 November 2018
    ...Act 2006 (the “CA 2006”). Background 2 The background to the Scheme is set out in a judgment which I gave on 2 November 2018: [2018] EWHC 2911 (Ch) (the “Convening Judgment”). I shall not repeat it at any length here. In the Convening Judgment I gave my reasons for convening one class meet......
  • Barclays Bank Plc
    • United Kingdom
    • Chancery Division
    • 29 January 2019
    ...a judgment sanctioning the scheme would be given immediately. I made it explicit that this was not appropriate. 120 For example, in Noble Group Limited [2018] EWHC 2911 (Ch) at [178]–[180] I said, “178. … As has been demonstrated on many occasions, flexibility and the ability to move swift......
  • Colouroz Investment 2 LLC
    • United Kingdom
    • Chancery Division
    • 13 July 2020
    ...52 That formulation of the New Practice Statement tracks the jurisprudence which I explored in Re Noble Group Limited (convening) [2018] EWHC 2911 (Ch), [2019] 2 BCLC 505 at [60]–[76]. The authorities make clear that at the convening hearing the court will consider class questions and oth......
  • Syncreon Group B.v
    • United Kingdom
    • Chancery Division
    • 31 July 2019 jurisdiction or should otherwise refuse to exercise its discretion to sanction the scheme (“roadblock” issues): Re Noble Group Ltd [2018] EWHC 2911 (Ch) (“ Noble”) at [76]. Classes: the legal test 17 The legal test to apply in determining whether creditors form a single class is whether......
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