The Distillery: Whitehaven ruminations

The departure of Nathan Tinkler from the Whitehaven register hasn’t stifled speculation about the company’s future. The appointment of Raymond Zage, who now speaks to the board for Tinkler’s old stake, means Farrallon Capital is hanging around for some serious potential Whitehaven upside.

Also in this morning’s edition of The Distillery, Billabong International is expected to accept the Altamont proposal and the commentators are very understanding as to why.

The Australian’s Sarah-Jane Tasker points out that Zage’s elevation to the Whitehaven board brings the speculation that Farrallon Capital will flog the stake it secured from Tinkler.

“However, as an original investor in Tinkler's Aston Resources, and having gained an interest in Whitehaven when Tinkler merged his assets into Whitehaven, Zage's fund is unlikely to find the current $2 Whitehaven share price an attractive selling point. It is a highly unusual move for Zage, given that his company and its parent, Farallon Capital Management, do not generally join the boards of the companies they invest in. He is obviously comfortable with the team at Whitehaven, having been involved with chairman Mark Vaile and managing director Paul Flynn when they were at Aston Resources with Tinkler. Zage started his journey in Australia's coal space by backing a young, ambitious Tinkler and his vision for an independent coal player to service the rise of Asia.”

The Australian Financial Review’s Matthew Stevens says Whitehaven is an embodiment of sorts of Australia’s recent economic troubles thanks to the slumping coal price and high construction costs. But job losses are not an issue for Whitehaven, unlike the rest of the coal industry, writes Stevens.

“Because Australia’s biggest remaining independent coal company finds itself, at once, on the precipice of financial viability and also facing a transformation into something a whole lot larger, more cost-competitive and, hopefully, more profitable. Whitehaven is getting to the cash-flow free end of a step-change in production with the completion of its 6 million tonnes per annum Narrabri underground. And with that ramp-up in hand Whitehaven’s new management team remains justifiably optimistic that it can clear quickly the unexpected approval hurdles that have forced slippage in the timetable for its Maules Creek development.”

Meanwhile, The Australian’s Richard Gluyas reports that to say Centerbridge Partners and Oaktree Capital are disappointed with their dealings with Billabong is an understatement.

“The consortium can't get its head around the fact that what it sees as a demonstrably superior proposal hasn't really troubled the Billabong scorekeeper. It measures its global reach, investment track record and funds under management against Altamont and concludes it's not even a contest. Yet the truth is that Altamont's offer to preserve some equity value, when Centerbridge-Oaktree were initially fixated on a debt-for-equity play, made it a more natural partner for the Billabong board. When Altamont secured the services of respected brand manager Scott Olivet as Billabong's chief executive-elect, it was really Altamont's game to lose. The former Nike and Oakley executive was central to yesterday’s ‘let's get on with it’ plea from Pollard.”

Business Spectator’s Stephen Bartholomeusz says the board would be well aware that it has to be careful if it chooses Altamont over Centerbridge.

“Given that both proposals involve Billabong’s existing shareholders continuing within the existing listed vehicle it is reasonable for the board to take into account issues other than the simple financials, but the board will also be quite conscious of its potential exposure if it turns down a proposal offering more tangible value. Whatever the outcome, the result makes it very apparent that Billabong needs to lock up a deal and put its new funding and capital structures and new leadership in place as soon as practicable if the 2012-13 year is to be seen with hindsight as the absolute nadir of its fortunes.”

The Australian’s John Durie reports that Flight Centre “shot the lights out” with its results yesterday, evidenced by the 8.5 per cent jump in the share price to an all-time high.

The Australian’s Darren Davidson reports on comments from Seven Group boss Don Voelte that the company won’t take out regional affiliate Prime Media and the implications this has for the industry’s consolidation.

And finally, Fairfax’s Malcolm Maiden casts his sceptical eye over the presumption that business confidence will be noticeably and sustainably higher under a Coalition government.