Australian
billionaire faces ruin as coal price plummets
Nathan
Tinkler became Australia’s youngest billionaire in record time
thanks to a series of aggressive bets on the country’s coal mining
sector.
15
March, 2013
But
the man who started his career as a pit electrician acknowledged on
Thursday he may have attempted one risky deal too many, leaving him
with an undiversified portfolio that was heavily exposed to
plummeting coal prices.
“I
got left holding the can,” Mr. Tinkler told an Australian court
during a grilling about his failure to pay junior coal explorer
Blackwood Corp. Ltd. $28.4-million Australian ($29.1-million U.S.)
for an agreed share placement deal.
Mr.
Tinkler, 37, flew in from his home in Singapore to take the stand –
the first time he has faced public scrutiny since creditors began
chasing him to recover millions of dollars in unpaid debts.
Along
with other Australian mining barons, such as heiress Gina Rinehart,
the eccentric Clive Palmer and Fortescue Metals Group Ltd.’s Andrew
Forrest, Mr. Tinkler is facing a sharp tail-off in the country’s
wealth-generating decade-long mining boom.
But
unlike his peers, who have businesses stretching across sectors
including iron ore and gas, the young upstart put all his eggs in the
coal basket.
Mr.
Tinkler had so much faith in the coal industry, he revealed to the
court on Thursday, that he had begun talks with Blackwood to buy
assets from Brazilian miner Vale SA even before the share placement
had been completed.
Instead,
Mr. Tinkler said he – and everybody else – was caught out by a
sudden downturn in the coal market that led his prospective financial
backer for the deal, commodities house Noble Group, to leave him in
the lurch.
“I
had a clear path to fund this – that path fell away and market
conditions changed,” he said.
A
Noble spokesman said he had no comment about Mr. Tinkler’s
statements.
Mr.
Tinkler had been threatened with arrest if he did not appear in court
on Thursday after losing a legal bid to stop the examination going
ahead.
Wearing
a slightly too-large navy suit and looking slimmer than he has in
previous public appearances, Mr. Tinkler said he had believed he had
an agreement with Noble to buy his royalties from Yancoal Australia
Ltd.’s Middlemount mine, which he valued at $25-million to
$30-million (Australian).
But
under repeated questioning from Robert Newlinds, the lawyer for
liquidator Ferrier Hodgson, Mr. Tinkler acknowledged there was no
written agreement or “letter of comfort” from Noble, a long-term
business partner, about the royalty deal.
“I
certainly wish I had done that,” Mr. Tinkler told the court.
“I
had a strong working relationship with Noble,” he said, noting
deals of much larger value he had conducted with the commodities
trader. “I had no inkling that I would need to go to that level of
certainty, or comfort if you like, to put that in place.”
He
said he was unsure if he had made notes or exchanged e-mails with
Noble executive William Randall on their talks.
Mr.
Tinkler also mentioned preliminary talks with major lenders about
potential financing for the deal, including the use of three of his
houses in Australia worth up to $20-million as security.
Mr.
Tinkler made his fortune selling a coal tenement in 2007, only to
lose his billionaire status when coal prices slumped last year. At
the peak of Australia’s once-in-a-generation resources boom, he
spent millions on racehorses and sports clubs.
He
has been forced to sell assets including horses from his large
stable. Liquidators have seized his private jet and helicopter.
The
Blackwood case is one of a series of lawsuits against the former
billionaire over unpaid bills and commercial disputes that have
raised questions about the future of his main asset, a near one-fifth
stake in Whitehaven Coal Ltd., Australia’s largest independent coal
miner.
Whitehaven’s
shares have plunged more than 25 per cent since the start of the year
following a profit downgrade and the announcement of a management
reshuffle, leaving the value of Mr. Tinkler’s 19.4-per-cent stake –
once worth more than $2-billion – at just over $500-million.
That’s
less than a $600-million loan that sources have told Reuters he owes
against that stake to his main backer, U.S. hedge fund manager
Farallon Capital Management LLC’s asset manager Noonday.
Noonday,
which heads the loan consortium that includes Credit Suisse Group AG,
has been looking at options including pressing for the sale of shares
or converting some of the loans into equity, sources have told
Reuters.
If
liquidators find that Mulsanne cannot cover the Blackwood liability,
Mr. Tinkler could face charges or fines for insolvent trading.
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