* Nathan Tinkler turned A$1 mln deposit on coal lease into
$1 bln fortune
* Falling Chinese demand for Australian coal has hit tycoon
* May be forced to sell major coal asset to meet debts -
* Hundreds of his racehorses due to be sold this month
* Tinkler companies face lawsuits over missed payments
By Jane Wardell and Narayanan Somasundaram and Saeed Azhar
SYDNEY/SINGAPORE, Oct 15 Nathan Tinkler became
Australia's youngest billionaire with a well-timed investment in
But as China's slowing economic growth cuts demand for iron
ore and coal, Tinkler's rise from obscure electrician to mining
magnate, sports club owner and champion of a rejuvenated
Australian industrial town could be unravelling.
Creditors are circling Tinkler, 36, who turned a A$1 million
bet on an Australian coal deposit into a billion dollar fortune.
At least three companies within his stable of some 50 firms
are being sued for about A$200 million ($205.5 million) in
total, including for missed payments, according to court
documents. In a bid to raise funds, hundreds of his racehorses
will be sold at auction this month.
Tinkler's ability to pull off big deals means not everyone
bets his difficulties will spell the end to his fortune. But his
fate is being watched by investors who see his travails as a
cautionary tale. Tens of billions of dollars sunk into Australia
to build mines, ports and rail lines are hanging in the balance
as China's hunger for resources falters.
"Mr. Tinkler was perhaps luckier than some. He was able to
pull off two very good deals when the whole global economy was
going down. Now that coal prices have deflated, that has exposed
the risks to those highly leveraged deals," said Matthew
Trivett, an analyst at Patersons Securities in Brisbane.
Benchmark prices for iron ore and coal, Australia's largest
export earners, have fallen about a third in the past year as
China slows. Miners including BHP Billiton, Rio Tinto
and Xstrata have shelved expansion plans and
At risk is Tinkler's 21.4 percent stake in Australia's
biggest independent coal company, Whitehaven Coal,
which represents the bulk of his wealth. The value of his stake,
worth about A$1.2 billion at its peak, has shrunk to less than
Tinkler has also borrowed heavily against the stake. Three
sources with direct knowledge of the financing told Reuters that
Tinkler has p l edged a 19 percent stake in Whitehaven in return
for A$600 million in loans from a group led by U.S. hedge fund
manager Farallon Capital Management LLC's asset manager Noonday
and Credit Suisse. The loans were granted in 2010 and
Sliding coal prices have hit Whitehaven's share price and
the collateral now covers only about 80 percent of the loan plus
accrued interest, pushing lenders to weigh up a sale of the
holding to recoup their debts, one of the sources said.
Local media reports say Tinkler has asked wealthy friends to
tide him over and tried to offload his entire racing business at
a loss to a Gulf Arab sheikh.
Tinkler, who recently relocated to a leafy enclave in
Singapore, declined repeated requests for an interview. His
Sydney-based spokesman, Tim Allerton, also declined to comment
on specific questions about Tinkler's finances.
Credit Suisse and Farallon declined to comment.
Potential buyers for Whitehaven, whose assets include a big
undeveloped coal deposit the miner says is capable of producing
almost 11 million tonnes a year, are coal firms or customers.
But a lack of immediate buyers has ramped up pressure to
convert some of the loan into equity, an unattractive option
given Whitehaven's shares have nearly halved in six months, a
second source said.
"It is not obvious to me why lenders would want to sell at
the current share price to the market, but I suppose that is one
of the alternatives, as is selling to a single buyer," said the
Investment banks including UBS were sounding out investors
on their appetite for a "good piece" of the stake and to see
what sort of discount might be needed, the third source said.
UBS declined to comment.
Tinkler has not spoken publicly on his situation for months
and one of the sources with knowledge of his financing said he
had not given any clear assurances on his plans to repay debt.
The three sources asked not to be identified because they
were not authorised to talk to the media on the matter.
RIDING THE RESOURCES BOOM
Some analysts said it was not a foregone conclusion Tinkler
would have to sell his Whitehaven stake, particularly if the
shares can recover from speculative selling pressure by funds.
"The share price has been pressured by funds shorting the
stock to test Tinkler's (debt) covenants. If it recovers from
here, he can hold on to it but still find other ways to fulfil
his obligations," said Andrew Pedler of brokerage Wilson HTM.
Only a year ago Tinkler was living the Australian dream.
The boy who had failed his senior school exams made his
fortune literally from the underground up.
After working as a mining pit electrician in the Hunter
Valley, a wine growing and coal region 150 km (90 miles) north
of Sydney, Tinkler started his first business in 2002, providing
electricians and maintenance workers to the mines.
His masterstroke was scraping together a A$1 million deposit
for a coal lease in Queensland state that others considered
Tinkler sold the lease to Macarthur Coal, since bought by
Peabody Energy, in return for 10 percent of the
Australian miner. He then sold that stake to ArcelorMittal
, the world's biggest steelmaker, at a time China's
appetite for coal appeared insatiable. He made A$144 million.
Emboldened, Tinkler reinvested funds to establish his own
firm, Aston Resources, which he floated in 2010. Aston was then
bought by Whitehaven as part of a $3 billion deal that
catapulted Tinkler into the ranks of wealthy Australian mining
In a rare television interview early last year, Tinkler
bridled at suggestions his early success was a lucky punt.
"Overnight success: I think that's what other people
determine when you've reached a point and they want to know
you," he said. "It was a bit of a hard slog. It was a difficult
four or five years to get to where we were."
After the string of audacious deals, things turned for
Tinkler this year. A bold A$5.3 billion bid to take Whitehaven
private fell apart after he failed to bring sufficient equity
investors on board, sources with direct knowledge of the deal
told Reuters at the time.
Tinkler's companies also face lawsuits over disputed
Property firm Mirvac Group is suing Tinkler's Ocean
Street Holdings and guarantor Buildev Group for A$17 million
after a Sept. 1 court deadline passed to pay for land for a coal
terminal. An Australian court will hear the case on Oct. 23-24
after lawyers for the Tinkler firms sought more time.
Mining services company Sedgman was asking a court
to appoint liquidators to three Tinkler firms - Tinkler Group
Holdings, Hunter Ports and Bolkm - over a A$2 million debt. On
Friday, Sedgman said a confidential settlement had been reached
ahead of a hearing scheduled for Monday.
Coal miner Blackwood Resources is also asking a
court to wind up another Tinkler company, Mulsanne Resources,
over A$24 million it says it is owed in a share deal.
Hamish Collins, a former CEO of Aston Resources, has sued
the company for A$157.4 million after alleging Tinkler reneged
on a promise to hand over the equivalent of 5 percent of the
value of the company's main mining assets.
The lawsuit was before Aston's takeover by Whitehaven and
Collins' lawyers have said they will pursue Whitehaven.
Whitehaven said it was aware of the action and was seeking
legal advice. Tinkler's spokesman in Sydney declined to comment
on any of the lawsuits.
Tinkler's shadow looms over his home town of Newcastle,
which until recently was happy to adopt the nickname Tinklertown
as the "local boy done good" splashed around his new-found
Initially, Tinkler splurged on the trappings of a rich young
man. He bought two properties in an upmarket beachside suburb of
Newcastle for A$8.8 million, promptly knocked one down and
sought planning approval for a A$14 million redevelopment. He
also bought a rare A$500,000 Ferrari that was last year stolen
and discovered burnt-out in bushland outside Newcastle.
Tinkler invested in a business that leased exclusive cars to
members for an annual fee, before the Australian Supercar Club
went bankrupt with debts of $4 million.
A blaze of publicity accompanied his purchases of the town's
struggling soccer and rugby league teams and his plans for a new
residential and commercial development in the tired docks area.
The keen racegoer also sank an estimated A$200-$300 million
into building Australia's biggest horse breeding and racing
company, Patinack Farm, in the area.
"He rode in as a white knight," said Paul Murphy, chairman
of the business and community group the Newcastle Alliance,
describing how many businesses picked up contracts.
For some, Tinkler remains an asset.
"If he's going to spend his money in Newcastle and support
soccer, that's fantastic," said Mark Henderson, a public servant
who was with his children watching the Tinkler-owned Jets train.
LOVE AFFAIR GONE BAD
For others, the love affair is over.
Four businesses ranging from builders to the jockey club
told Reuters they had spent months chasing payments they say are
owed by Tinkler firms.
"This is an ongoing pattern that has not changed and trust
has been completely eroded," Murphy said.
The A$55 million development near the docks is just a hole
in the ground as Tinkler's Buildev Group faces a deadline for
payment for land later this month.
Tinkler's situation may become clearer this month since
court hearings due on the Mirvac, Blackwood and Sedgman lawsuits
are likely to mean he will have to disclose financial details.
In Newcastle, builder Bob Jeffkins has appointed a debt
collector to seek A$18,000 he says his family firm is owed, but
which he is not confident of getting back.
"It doesn't matter how many millions you have got if you
spend it all," Jeffkins said.
($1 = 0.9735 Australian dollars)
(Additional reporting by Melanie Burton in Singapore; Editing
by Lincoln Feast, Ed Davies and Dean Yates)