One of Noble Group Ltd.’s largest shareholders has stepped up criticism of the embattled commodity trader, describing losses as “shocking” and warning the billions in red ink will pile more pressure on investors to agree to a controversial debt-for-equity rescue plan that it opposes.

The losses will “erode what little cash Noble has left, and puts further pressure on stakeholders to accept the restructuring proposal,” Goldilocks Investment Co. said in a statement, referring to derivative-contract writedowns and fourth-quarter losses on its core business. “These figures are extremely shocking.”

The trader, which reports earnings on Wednesday, warned last week it will post a loss for the final three months of last year, which would bring the total for 2017 to almost $5 billion. While the company wants to get investors to agree to the rescue, which will hand control of the group to creditors and give management a holding of up to 20 percent, Goldilocks is leading opposition to the proposal. In its attack, Goldilocks also raised questions about Noble Group’s accounts, echoing earlier criticism by long-time foe Iceberg Research.

Noble Group booklets
Photo: Bloomberg News

An external media representative for Noble Group in Singapore referred to a 2015 report by PricewaterhouseCoopers on the company’s valuation methodology, and declined to comment further.

“The profit warning indicates that Noble’s remaining core business is still hemorrhaging cash,” Goldilocks said. “We urge all stakeholders—shareholders and creditors—to join Goldilocks in opposing the proposed restructuring and work together for a more equitable and meaningful turnaround.”

Noble Group shares were level on Tuesday, trading at 17.9 Singapore cents in the city-state at 1:13 p.m.; they are 92 percent lower over the past year. The 2020 notes rose 0.2 cent on the dollar to 48.2 cents, after gaining 0.93 cent on Monday for biggest gain since Jan. 30, according to Bloomberg-compiled prices.

Under the rescue proposal, which has been backed by some creditors, about half of the Hong Kong-based company’s $3.5 billion in debt, including bonds, will be switched into new equity, while perpetual bondholders are being offered a few cents on the dollar. All existing shareholders will get a 10 percent stake. Goldilocks has complained of “massive dilution”.

In its statement, Goldilocks questioned the magnitude of the non-cash losses that Noble Group announced on derivatives contracts, and its accounting. “This seems to suggest that Noble has consistently overstated the value of its derivative contracts over this financial year,” it said.

Pushing Back

As Noble Group’s crisis has unfolded over the past three years, the company has repeatedly defended its financial statements, especially when parrying criticism from Iceberg. In addition, founder Richard Elman has refuted claims made by a former chief executive officer about the accounting.

Goldilocks also queried a plan to sell an offtake agreement for petrochemicals for $10.1 million, below book value. “We find the terms of the proposed disposal highly questionable,” it said, highlighting the discount offered on the sale, which was announced on Monday.

Goldilocks has an 8.1 percent stake in Noble Group, making it the fifth-largest holder, according to Bloomberg data. In January, the investor urged the Singapore regulator to probe the trader’s actions over the past two years.

Bloomberg News