The restructuring of Noble Group Limited was implemented by a combination of parallel schemes of arrangement in Bermuda and England and the subsequent appointment of a provisional liquidator in Bermuda on a “light‐touch” basis.
Noble Group was registered and incorporated in Bermuda and listed on the mainboard of the Singapore Exchange. It was the ultimate holding company of a group of companies that was one of the world’s largest commodity traders, with hubs in London, Hong Kong and Singapore. The group managed a portfolio of global supply chains which involved marketing, processing, financing and transporting across the world. The restructuring was highly complicated owing to the very wide range of creditors involved and the global scale of the group’s business.
Noble Group ran into grave financial difficulties because of the industry‐wide decline in commodity prices between 2014 and 2016. Noble Group’s pre‐restructuring debt consisted of two series of English notes and one series of New York notes (total principal outstanding: USD 2.3 billion); a USD 1.14 billion revolving credit facility; USD 400 million capital securities; and certain contingent liabilities to non‐finance creditors, including in respect of certain litigation.
To avoid liquidation, the company’s directors pursued a financial restructuring based on a debt for equity swap and provided for the transfer of Noble Group’s assets to newly incorporated subsidiaries of a newly incorporated holding company, New Noble. Noble Group itself was to be dissolved. Scheme creditors were to be issued with new debt instruments and 70% equity in the new group. The remaining equity was to be apportioned, with 20% issued to existing shareholders and 10% issued to existing management. One of the main goals of the scheme was to provide the new group with access to new hedging and trade finance facilities (USD 800 million). These facilities were to be provided by a finance creditor, but also by scheme creditors who chose to guarantee the facility in exchange for senior debt instruments.
The company originally sought to achieve the restructuring solely by entering into parallel schemes of arrangement with its creditors (which were governed by both English and Bermuda law processes). Prior to presenting the English scheme of arrangement, which was regarded as the “lead” scheme, Noble Group took steps to shift its centre of main interest from Hong Kong to England, including by relocating its main office to London from Hong Kong.
The English and Bermuda schemes of arrangement were approved by an overwhelming majority of scheme creditors and received the blessings of the Courts in both jurisdictions. The English scheme was sanctioned on 12 November 2018 and the Bermuda scheme was sanctioned on 14 November 2018. The US Bankruptcy Court for the Southern District of New York granted recognition of the scheme in the US, via Chapter 15 of the US Bankruptcy Code, on 15 November 2018. Thereafter, all that remained was for the company’s directors to implement the scheme.
Following sanction of the schemes, however, the Singaporean authorities blocked the transfer of Noble Group’s listing on the Singapore Exchange to New Noble because of ongoing investigation of the company and one of its subsidiaries. It was previously anticipated that Noble Group’s listing status in Singapore would be transferred to New Noble and the company’s directors had received prior shareholder blessings to pursue the restructuring on this basis. For a number of reasons, and importantly, the stance taken by the Singaporean authorities, the directors were prevented from implementing the scheme in the manner contemplated.
Against this background, Noble Group’s directors had to pursue its restructuring using Bermuda appointed provisional liquidator on a ‘soft’ basis. This is where the Bermuda Court appoints an officer (typically an insolvency practitioner) for a limited purpose with clearly defined powers (known as “light touch powers”) which may be used where there is a prospect of ‘rescuing’ an insolvent company through restructuring without the displacement of all of the Board’s executive functions. In a ‘soft’ liquidation, a company may continue its business operations as usual, pending the implementation of a restructuring plan.
On 14 December 2018, the Bermuda Court appointed a provisional liquidator with light touch powers over Noble Group. The significance of this appointment lies in the fact that the provisional liquidator would not have the same constraints faced by the company’s directors. His mandate would be solely guided by the best interest of the creditors, while at the same time being subject to the surveillance of the Court and at the same time having the security blanket of the Court’s ability to order a stay of proceedings against the company. In the context of Noble Group, the provisional liquidator was granted sufficient latitude to implement the transfer of the company’s assets to the New Noble provided that the scheme creditors were not prejudiced, even if that meant that the New Noble would no longer have a listing on the Singapore Stock Exchange as previously envisaged. Today, the New Noble is fully operational.
Provisional liquidators with light touch powers would normally be appointed (if at all) prior to the proposal of a scheme of arrangement. Thus, when the Bermuda Court appointed provisional liquidators over Noble Group after the approval of the scheme in a company‐driven restructuring, this was an innovative and welcomed development in Bermuda restructuring law. More significantly, this decision allowed the company’s plans for restructuring its business operations to come to fruition, albeit with slightly modified terms. Had the Bermuda Court not appointed a provisional liquidator, the company would have undergone a compulsory liquidation, its business would have come to an end and creditors would have received a significantly smaller dividend.
The Bermuda Court has developed a rescue culture in its insolvency regime. Through the appointment of provisional liquidators with soft touch powers and the Court’s broad discretion to determine the allocation of powers and responsibilities between provisional liquidators and company directors, the Court continues to create ‘lifelines’ for a healthy recovery of distressed companies and for the protection of creditor interests. Moreover, the Bermuda Court is often willing to work in tandem with and to lend assistance to the foreign courts and companies having interests in other jurisdictions where there is a substantial international creditor and/or asset base.