Solid waste muni offering due from company facing investor lawsuit

Noble Environmental provides waste pickup, waste disposal and waste-to-energy services in western Pennsylvania.

Noble Environmental

A municipal bond deal is planned for a waste management company that is facing a shareholder lawsuit.

Fifth Third Securities and U.S. Bancorp plan to price tax-exempt bonds for Noble Environmental, a waste management company, through the Pennsylvania Economic Development Financing Authority as conduit.

The deal has sat on the day-to-day calendar for a month, and none of the bond documents are easily accessible.

Noble Environmental executives are being sued by a shareholder who claims they used the company to enrich themselves, and the lawsuit is headed to mediation.

Noble Environmental and the Pennsylvania Department of Economic Development declined to say when they expect the deal to price or the reason for the delay.

The $250 million deal was first posted on the MuniOS document distribution platform on June 2. The MuniOS page has a preliminary limited offering memorandum, financial statements from 2022 and 2023 and a video presentation. However, all of those documents are password-protected.

In a limited offering, which is typical for unrated deals, the bonds not sold publicly but rather limited to “accredited investors” such as high-net-worth individuals and institutions like bond funds, with minimum $100,000 denominations.

CTBH Partners is the municipal advisor and Ballard Spahr is counsel, according to the MuniOS landing page.

Proceeds will be used for solid waste disposal facilities, infrastructure and equipment in Pennsylvania, primarily in the Pittsburgh area, according to a DCED document. Noble, which is privately held, provides waste collection and disposal services in western Pennsylvania, with a waste-to-energy plant.

Of the authority’s 1318 listed issuances on Bloomberg, only 21 — less than 2% — were 144A, or qualified institutional investor offerings. Those deals usually come to market less than once a year, and often have multi-state components.

This will be PEDFA’s second private deal this year. In March, it priced a multi-state deal with the West Virginia Economic Development Authority and the Maryland Development Corporation on behalf of Core Natural Resources. That deal’s LOM is available to the public.

The DCED did not comment on how often they have priced deals with password-protected investor materials.

“It’s unusual for a company that’s getting sued, that has a material lawsuit against it, to be selling muni bonds,” Matt Fabian, partner at Municipal Market Analytics, said. “And it’s much more typical for bond documents to be available than not available. But it makes sense that they both happen from time to time.”

PEDFA held a Tax Equity and Fiscal Responsibility Act hearing for the Noble bonds on April 15. According to the meeting minutes, the hearing lasted 15 minutes and no one asked any questions. A TEFRA hearing is required before a conduit issuer sells private activity bonds.

“The state getting attached to [the deal] does give you a little more confidence,” Fabian said; state-owned and state-supervised conduit issuers usually avoid risky deals to protect their reputation, he said.

The lawsuit was brought by Michael Schatzow, a shareholder, against four members of Noble’s leadership; Archaea, inc., a company that harvests natural gas from landfills; and Rice Investment Company, its financial advisor. It was filed on May 20, 2024.

One of the defendants, former Noble president Richard Walton, was fired because of misconduct, according to the lawsuit. However, the rest of the defendants remain on the board, including CFO Terry Cunningham.

Noble’s founders created Archaea and claimed that Noble held 10% of Archaea’s stock, the lawsuit claimed. When BP acquired Archaea in 2022 for $4.1 billion, Noble only received $25 million, while individual executives reaped hundreds of millions of dollars, the lawsuit says.

The suit accuses Noble’s leadership of using Noble’s coffers as a “piggy bank” for Archaea and their own personal expenses, misusing company cards and signing themselves low-interest loans.

Noble’s general counsel denied the claims in the lawsuit last year. The company assembled a Special Litigation Committee to investigate the claims, and in April, the committee determined not to seek the dismissal of the lawsuit. The parties are seeking a date for mediation.

Notably, the suit was filed on behalf of Noble Environmental. If the plaintiff is successful, the company will not lose money.

Lawsuits are “inherently unpredictable,” Fabian said. The deal may be on the day-to-day calendar because the company is waiting to see the outcome of the mediation, he added.

The lawsuit is not the only headwind facing Noble’s deal team, Fabian said. Yields in the muni market have crept up this year and high-yield funds have seen little inflows.

These conditions might make high-yield investors more cautious than they would be otherwise, Fabian said. “This isn’t a seller’s market in high-yield right now.”