* Lenders swap Tinkler debt for 20 pct stake in Whitehaven
* Hedge fund Farallon becomes top shareholder
* Farallon in no rush to sell down stake-source
* Coal assets plentiful in weak market-analysts
* Whitehaven shares jump 9 pct
By Sonali Paul
MELBOURNE, June 19 Australia's Nathan Tinkler
has handed his stake in Whitehaven Coal Ltd to lenders
to pay off most of a $634 million debt, in a deal that may
eventually put one of the country's biggest independent coal
miners into play.
But the funds now owning a fifth of Whitehaven are unlikely
to sell anytime soon, as they are sitting on a paper loss on
their loan to Tinkler and won't get back their money without a
big recovery in the coal market.
Tinkler swapped his Whitehaven stake to a syndicate led by
U.S. hedge fund Farallon Capital Management, which had lent him
$634 million, leaving him with a rugby league team and soccer
club in Australia and other business interests in Australia and
Farallon picked up 9.9 percent of Whitehaven, increasing its
holding to 16.6 percent, while others in the syndicate bought
the rest of Tinkler's stake, Whitehaven said on Wednesday.
While a range of suitors have looked at Whitehaven over the
past three years, finding a buyer now would be difficult as
several superior coal assets are already on the block from
majors led by Rio Tinto and BHP Billiton.
"No lender wants to be holding the collateral. But the
market is tough, the resources space is difficult -- the coal
space is especially so," said Andrew Harrington, an analyst at
"Their best interest would be to watch the shares appreciate
in value. There's no benefit for them in dumping the shares," he
The shares would have to trade above A$3.00 for the lenders
to get their money back. And with Farallon having acquired its
initial 5 percent stake in Whitehaven in April 2012 when the
shares were worth around A$5.50, it is sitting on a big loss.
The stock last traded at A$2.20, after jumping nearly 10
percent to a one-month high of A$2.31 as investors welcomed
Tinkler's exit. The shares had been depressed for some time on
speculation he would be forced to dump his holding.
Farallon plans to wait for the stock to trade well above
A$3.00 before deciding its next move, said a person familiar
with the situation, who declined to be named.
"Farallon looks forward to growth in shareholder value over
time," the hedge fund said in a U.S. announcement.
Analysts say coal prices, down about 30 percent over the
past 18 months, are unlikely to recover soon, with supply
And in a market crowded with majors trying to sell coal
assets, it would be tough to find a buyer for Whitehaven at the
moment, especially since its best asset, the Maules Creek
project, has yet to secure development approval.
"We have to think the outlook for coal in the near-to-medium
term is not rosy, so I really question the attraction from a
pure valuation stance," said Ric Ronge, a portfolio manager at
Suitors who have looked at Whitehaven include Indian
conglomerate Aditya Birla, Tinkler himself, and most recently
China's biggest coal producer, Shenhua Group.
Peabody and China's Yanzhou Coal previously bid
for Whitehaven, but have since made big acquisitions in
Australia and are suffering in the coal slump.
Tinkler, whose wealth was largely tied to his Whitehaven
stake, has been under pressure as coal prices have tumbled. His
stake was worth A$1.1 billion a year ago, and on Wednesday he
admitted he was a reluctant seller.
"While we are happy with the price we have received, being a
40 percent premium to the current market price...we feel
strongly that this still significantly undervalues the company's
underlying asset base," Tinkler Group said in a statement.
"Many will be aware of the emotional attachment that Mr.
Tinkler has to the assets of the company, specifically Maules
Creek, and that selling this stake was a difficult decision."
The 37-year-old, who now lives in Singapore, has been the
target of several lawsuits in Australia to recover millions of
dollars in unpaid debts, with most of them settled out of court.
He put his thoroughbred racing and stud empire up for sale,
and his private helicopter has been seized by creditors.
Even after the debt-for-equity swap with the Farallon led
syndicate, he still owes them $100 million, maturing in 2014,
said the source familiar with the situation.
Under the deal, if Whitehaven's shares trade above A$2.96
between January and March then he will be off the hook. If not,
he will have to come up with the funds.
However, in a sign that he may be feeling more comfortable
about his financial situation, the entrepreneur earlier this
month bought back some of his own race horses at auction.
Whitehaven Chief Executive Paul Flynn said Tinkler's exit
removed a big distraction for the board and management, who
could now focus on developing Maules Creek. The company hopes to
win federal approval for the project within a few weeks.