How we helped
Few would have predicted a second act for Asia’s largest commodities business after the high-profile accounting scandal that saw it de-listed and disgraced.
Reinventing Noble Group’s fortunes took decisive financial stewardship, expert operational turnaround and wholesale culture change. The right interventions were critical in positioning the new firm to take advantage of extraordinary market opportunity when it arose.
Fallen giant
The company that engaged AlixPartners in early 2021 was a shadow of the $100 billion revenue business that had once ranked alongside industry titans Vitol, Glencore and Trafigura in Asia. In the aftermath of its 2018 collapse, a complex debt-for-equity restructuring process eventually handed control of the new Noble Group Holdings to its creditors. Even after asset disposals, the group had debts of $1.8 billion, split across a separate asset holding company and trading business - and was struggling to find a path back to profitability.
Priority one: restore investor confidence and reduce debt
With interim specialist Matt Hinds serving as Executive Chairman, AlixPartners took on a leadership as well as an advisory role. Triage can be complex in a firm beset with internal problems and external challenges, but the one prerequisite for Noble’s recovery was clear: tackle an overleveraged balance sheet that was running out of cash. The trading business was streamlined, closing an under-performing metals book to focus on three commodity classes in which Noble had deep expertise and saw growth potential: thermal coal, metallurgical coke and a niche oil business in Southeast Asia. But all its efforts would be hamstrung without access to the lifeblood of commodities trading: affordable trade credit. Noble’s debts were choking its prospects of raising new trade finance.
A second restructuring was essential and meant shoring up belief among creditor-shareholders in the future of the business. Visibility was central to our operational turnaround strategy. A full suite of financial controls was introduced to ensure transparent reporting. Detailed business plans included short and long-range cash-flow forecasting: a rare display of confidence for an industry whose volatility causes most businesses to run shy of projections. As targets were met, investors were persuaded, and the restructuring was completed in early 2022 - reducing the company’s debt by two thirds and giving the trading business a fighting chance of competing with well-financed rivals.
Exorcizing ghosts and enforcing ethics
The company’s balance sheet was just one obstacle to breaking back into capital markets. The Noble name was inextricably linked with accounting irregularities being investigated in Singapore, and a coal-led portfolio spelled ESG headaches for financial partners. Most problematically, an investigation by the Monetary Authority of Singapore was still probing Noble’s pre-2018 accounting. The new leadership team invested significantly in legal services to assist the investigators to the full and draw a bright line under historical misconduct.
At the same time, the team set about cleaning house. Commodities trading is notorious for the disparity between strict ethical covenants required by investing institutions, and the murky realities of dealing in its front-end markets. The new Noble set out to make itself the cleanest operation in town, with new compliance and risk management systems requiring traders to work within stringent codes of conduct and tighter risk constraints. A new emphasis was placed on playing to Noble’s strengths but also playing by the rules. In key production markets, notably Indonesian coal, the business leveraged decades of experience and relationship-building to trade where global firms lacked the local savvy to operate profitably and legitimately.
“Luck is what happens when preparation meets opportunity” – Seneca
Our integrated approach to financial, reputational and organisational rehab helped stand new Noble up in time for the market upswing that followed the invasion of Ukraine. A leaner, better controlled trading outfit was ready to maximize its opportunities and outperformed its profitability targets threefold in 2022. At the same time, geopolitical shocks and the global scramble for secure energy increased institutional tolerance for financing coal. In Q1 2023, Noble announced a $300 million credit line - its first new finance since the 2018 restructuring.
Sold on new Noble
The trading business entered into a formal sales process in April 2023. Tellingly, all the bidding parties were those most knowledgeable and sceptical of prospective buyers: other traders. Noble’s sale to Vitol was a testament to the business’s restored credibility and value. From distressed and indebted to solvent and sellable in three years: a comeback story turbo-charged by a buoyant energy market but made possible by the right interventions at the right time.
