It’s almost possible to see what is going on at the heart of Nathan Tinkler’s empire, but the smoke signals coming out of there suggest he is in the grips of some sort of cashflow bind.
Yesterday, Tinkler missed a deadline to pay $14 million for industrial land in Newcastle that was part of a now-abandoned plan to build a new coal shipping terminal in the city. Tinkler’s property development group Buildev had been ordered to make the payment by the NSW Supreme Court and could well face legal action by listed developer Mirvac as a result of the non-payment.
Tinkler’s people aren’t commenting on the missed deadline, which comes weeks after Tinkler missed a deadline to pay just under $29 million for a stake in coal exploration company Blackwood Corporation. It was the second time Tinkler had missed a deadline for the Blackwood Corp payment and the company’s chief executive says he has no idea why the payment has not been made.
It’s been a terrible month for Tinkler. On top of these non-payments, Tinkler’s attempt to orchestrate a $5.6 billion takeover of Whitehaven Coal failed miserably, while an attempt to flog his horse racing and breeding empire for $200 million never really got off the ground.
That leaves a big question: what is the state of Tinkler’s finances now?
There are two reasons it’s very hard to know. First, Tinkler’s interests are spread across mining (a big stake in Whitehaven Coal and interests in other companies), sports (the horse racing business, the Newcastle Knights rugby league team and the Newcastle Jets A-League soccer team) and construction (through Buildev).
Secondly, we have very little idea of how much debt Tinkler might be carry against any of his assets.
For example, we know that Tinkler owns a stake in Whitehaven of more than 200 million shares, worth $697 million based on the company’s share price. But how much debt is against these shares? A Fairfax report says that “corporate filings” suggest Tinkler’s debt is as much as $638 million, although his spokespeople say it is a “fraction of that”.
If that report is right, then Tinkler may well be stuffed. But, in a way, the precise level of debt doesn’t matter.
Tinkler’s problem is that he appears to have no assets that are generating the sort of cashflow that he can use to meet payments like that owed to Mirvac and Blackwood. If he doesn’t have the cash to meet these payments, then there are further questions as to whether he can meet any financing requirements, no matter the size of the debts he is carrying.
Logic says that Tinkler could offload his Whitehaven shares and raise $697 million — or more likely $500-600 million, accounting for a big seller’s discount — and pay off his debts. But what would he be left with? And would it be enough to continue to meet the cash requirements of money-hungry assets like racehorses and sports teams?
The lesson from Tinkler’s predicament is one that many of our Rich List veterans have learnt the hard way over the years: paper wealth is great, but it’s cash that matters most.
*This article was originally published at SmartCompany.
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