Nathan Tinkler's fortunes were sealed only after adman John Singleton vouched for his business credentials, reveals Stuart Washington.
Early last year, Nathan Tinkler's bold move toward becoming Australia's youngest self-made billionaire was in jeopardy. A lender talking with him was "squeezing his balls" and trying to drastically cut Tinkler's stake in a coal deal, someone with knowledge of the negotiations said.
The Sun-Herald can reveal the Sydney adman and a fellow lover of horseflesh John Singleton played a small but crucial role in saving Tinkler's crown jewels and restoring his fortunes. Singleton's previously unreported role helped shore up support from four offshore billionaires who went on to back Tinkler's vision, write the cheque, and make Tinkler a billionaire in his own right.
Last week The Sydney Morning Herald revealed how Tinkler's riches have bankrolled purchases of more than 500 horses in a $200 million-plus spending spree with questionable returns. Today The Sun-Herald investigates the steps that transformed the 35-year-old former electrician into Australia's newest billionaire coal baron.
It is now part of Tinkler folklore that his $25 million downpayment on the Maules Creek coal reserve in the Gunnedah basin eventually landed him shares in Aston Resources worth more than $700 million. (The coup followed Tinkler's first big win, when he turned a $1 million downpayment on the Middlemount coal reserve in Queensland into $440 million in shares in Macarthur Coal.)
Less well known about Tinkler's biggest deal are the parts played by Singleton and the veteran businessman Mark Carnegie, and their roles in securing backing from offshore billionaires: a US hedge fund supremo and three of Asia's richest men.
Tinkler's profile rose as he bought fast cars (his Ferrari was stolen and torched this year), luxury properties in Newcastle and Brisbane, a rugby league team (the Newcastle Knights), a football team (the Newcastle Jets) and six horse farms. Yet it was his ability to buy an unloved coal reserve on the cheap and profit enormously that made his fortune.
"They took a view on the [Maules Creek] resource being better than what others had predicted," Peter Chilton, a commodities analyst with fund manager Constellation Capital, says. But early last year, the Maules Creek deal threatened to come unstuck. In the shadow of the financial crisis in November 2009, Tinkler made the $25 million downpayment to buy the coal reserve for $480 million from a Rio Tinto subsidiary.
In keeping with the legend of Tinkler putting down as little cash as possible in his deals, rumours abound that his cash share of the downpayment was only a fraction of the reported $25 million. But Tinkler had to find the extra $455 million, and fast: the deal had to be completed by mid-February. However, talks with the Hong Kong-based Noble Group - Tinkler's partner in the wildly successful Middlemount deal - were on the point of failing. "He realised they were going to squeeze his balls and chuck him out of it," someone close to the deal, who spoke on condition of anonymity, said.
Amid the negotiations, Tinkler had to find a new lifeline for the loans. Accounts differ, but the The Sun-Herald understands that Sydney-based boutique investor Shearwater Capital was the first to put in a call to the Singapore-based hedge fund, Noonday. But hedge funds don't just sign up for loans for hundreds of millions of dollars. BKK Partners, the investment adviser employing the former treasurer Peter Costello, put together a mini-roadshow for Noonday.
After presentations in Singapore, with pitches by Tinkler's key managers and the former deputy prime minister Mark Vaile, chairman of the new coal company, Noonday was prepared to support Tinkler. Almost.
Raymond Zage, the veteran head of Noonday known for his successes in risky Asian markets (investing in Indonesian banks is not for the faint-hearted), called in his San Francisco bosses. Tom Steyer and Andrew Spokes, the heads of the $US21 billion ($19.7 billion) hedge fund Farallon Capital, which controls Noonday, became personally involved in Tinkler's deal.
Steyer reportedly gets around in a 2005 Honda Accord and speaks out regularly on the need for clean energy. He wanted a validation from a trusted source of the Australian self-made man knocking on his door.
Steyer and Spokes turned to Carnegie, a veteran of the private equity scene whom Steyer knew. Carnegie reached out to his investment partner and friend Singleton, who had dealt with Tinkler in the past. Singleton was able to vouch for Tinkler's capacities as a businessman. After these calls, Steyer, with wealth estimated by Forbes magazine at $US1.3 billion, was the first of the four billionaires prepared to back Tinkler.
The roles of Singleton and Carnegie were recognised in their investments alongside Noonday, each gaining a stake in the Aston Resources' float worth $5.2 million.
Singleton, Carnegie and a spokesman for Tinkler would not comment. Noble Group did not return calls.
After signing up for the loan, Noonday brought in three of Asia's richest men, giving them direct exposure to Tinkler's deal. Two of them - Robert Kuok, who Forbes magazine credits with a net worth of $US12.5 billion, and his nephew Kuok Khoon Hong ($US3.5 billion) - have become rich from the sprawling Kuok Group conglomerate.
The other Asian billionaire prepared to back Tinkler was Martua Sitorus, whose $US3.2 billion fortune was built through co-founding the massive Singaporean vegetable oils group Wilmar International. Last year it bought the Australian sugar company CSR and branded it Sucrogen.
It is testament to Tinkler's high-wire skills that near disaster was averted. Aston Resources, which now houses the Maules Creek coal reserve, is worth more than $2 billion. Tinkler owns just under a third of it. Noonday, Farallon and the Asian investors have also been richly rewarded for their decision to back Tinkler with large stakes in Aston Resources.
What astonishes observers is how Tinkler's bets keep increasing. Most recently, he made an unsuccessful bid for the $1.8 billion Abbot Point coal loader in north Queensland. A plan for a $1 billion-plus Newcastle coal loader remains on his agenda.
An investment banker, speaking on condition of anonymity, predicts Tinkler's love of high-stakes deals is putting him on course to become Australia's richest man.
Or to end up with nothing.