Haircut for lenders, close shave for Nathan
The "purchase" price of $2.96 a share represents the floor price agreement between the parties and is a far cry from Whitehaven's trading price of about $2.10. It suggests Farallon and the others were forced to take a haircut on their loan to Tinkler.
The big question is whether this deal will be enough to allow Tinkler to fight another day.
Sources close to the coalmining entrepreneur say he walked away ahead from the Whitehaven share sale but that he still owed money to those that helped him finance the Whitehaven deal, including Farallon and Noonday Asset Management.
How such a strange deal between borrower and lender could have been structured this way is an imponderable.
It has been previously been reported that Tinkler owes his backers, who also include Credit Suisse and Kuok Group, $700 million. Tinkler will neither confirm nor deny this figure.
It has been clear this would happen for some time, as Tinkler was under water on his Whitehaven stake and has been in a desperate struggle to repay debt in other parts of his crumbling empire.
From his attempts to sell mega-houses to horse studs, Tinkler has been in a race to stay ahead of his creditors for more than a year. One of his more expensive follies was the thoroughbred stud Patinack Farm, which boasted 1000 horses and several properties.
It remains on the market with expectations the proceeds may not come close to the book price of $100 million. It is held as part of a family trust controlled by Tinkler's wife.
The future of Tinker-owned sporting clubs - the Newcastle Knights and Jets - is unknown but Tinkler, who now resides in Singapore, is said to be committed to retaining his interest in both.
In March the folks from Blackwood Corp did manage to tackle Tinkler who had welshed on a deal to buy a stake in that company. Earlier this month Blackwood struck a deal with Tinkler that he pays it $12 million in 11 days.
This may explain some of the timing of Wednesday's share sale - desperation.
The word from the Tinkler camp is that this payment to Blackwood will be made by June 30, with change left over.
Tinkler is keen to project that he is in command of his finances. But realistically the Whitehaven shareholding has been controlled by his financiers since the share price moved below $2.96.
It was only a matter of time before the lenders would formalise their position as major shareholders in Whitehaven. It is a move that has been characterised by Tinkler as emotional and difficult but will come as a major relief for Whitehaven's board and management, who have experienced no end of grief with Tinkler.
He attempted to oust Whitehaven directors at its 2012 annual meeting but did not gain the support of major institutional shareholders, nor (on a reading of the votes) even Farallon, which already had a 5 per cent stake in the coalminer.
Tinkler's holding presence on the Whitehaven register had been putting downward pressure on the company's share price as the market factored it in as overhang (that is, for sale).
Whitehaven now has clear air around corporate governance but there must be questions about whether the new shareholders are in for the medium to long term.
Broker notes put out this week followed the line that the resolution of the Tinkler shareholding position would be a positive for Whitehaven.
But the bottom line for Whitehaven like all other coal producers is that the price of the commodity has tumbled this year and as yet is showing no real signs of recovery.
Farallon said it believed the Whitehaven share price did not reflect the value of the company and it looked forward to growth in shareholder value over time.
It said nothing about looking forward to future dealings with Tinkler. Presumably they will not become strangers to each other given money is still owed.
How Tinkler empire unravelled
APRIL 2012
Tinkler merges private companies Aston and Boardwalk with Whitehaven, emerges with a 21% stake worth about $1 billion.
JULY 2012
Launches $5.3 billion bid to take Whitehaven private.
AUGUST 2012
Private company misses deadline to pay Blackwood $28.4 million in return for a 34% stake. With creditors lining up, Tinkler concedes he cannot raise funds to take Whitehaven private.
SEPTEMBER 2012
Creditors begin pursuit, Blackwood starts legal proceedings.
AUTUMN 2013
Settles numerous debts including with Tax Office.
JUNE 19, 2013
Whitehaven shares traded to Farallon to partly resolve debts.
JUNE 30, 2013
Due to pay $12 million to Blackwood. Failure will see liquidation process resume.
Frequently Asked Questions about this Article…
Tinkler’s main financial backers, including Farallon Management (and other lenders), cashed in his 19% stake in Whitehaven. The share transfer followed a floor-price agreement that effectively moved the holding into the hands of his financiers.
The $2.96 price was the agreed floor price for the sale, but Whitehaven was trading around $2.10 — and the deal suggests the lenders accepted losses relative to what they had expected to recover on loans to Tinkler, i.e. they took a haircut on their financing.
Yes. Sources named in the article say Tinkler still owes money to the backers who helped finance the Whitehaven deal, including Farallon and Noonday Asset Management. Media reports have previously suggested he owes about $700 million, though Tinkler has neither confirmed nor denied that figure.
Removing Tinkler’s large holding should reduce the ‘overhang’ and ease corporate governance concerns, which brokers flagged as a positive for Whitehaven. However, the company — like all coal producers — still faces broader headwinds because coal prices have tumbled and show little sign of recovery.
Tinkler has tried to sell high-value assets including mega-houses and his thoroughbred operation Patinack Farm (about 1,000 horses and multiple properties). The article notes Patinack remains on the market and proceeds are expected to fall well short of a $100 million book value.
Blackwood Corp started legal proceedings after Tinkler missed a prior payment related to a takeover stake; the recent deal required Tinkler to pay Blackwood $12 million within 11 days. The article reports the Tinkler camp says that payment will be made by June 30, and failure could see liquidation action resume.
The lenders and backers named in the article include Farallon Management, Noonday Asset Management, Credit Suisse and the Kuok Group, among others who helped finance Tinkler’s Whitehaven exposure.
Key milestones in the article: April 2012 — Tinkler emerged with about a 21% Whitehaven stake after merging private companies; July 2012 — he launched a $5.3 billion bid to take Whitehaven private; August 2012 — missed a deadline related to Blackwood; September 2012 — creditors began legal action; autumn 2012 — some debts settled (including tax); June 19, 2013 — Whitehaven shares were traded to Farallon to partly resolve debts; and June 30, 2013 — a $12 million payment to Blackwood was due.
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