Billionaire in the dock
A former Hunter Valley mine electrician, Nathan Tinkler borrowed big in 2005, made a fortune from speculative coal plays, and at the age of just 35 burst onto the rich list as Australia’s youngest billionaire. But Tinkler’s dreams had extended beyond even his massive resources. His business model only worked in a rising market and when coal prices slumped in 2012, he had no cash flow to service his huge debts. Tinkler looked for help but he had burned too many bridges. Within months he was trying desperately to stave off his creditors and fighting to save his fortune, and eventually, wound up in court.
The wind-up proceedings brought against Nathan Tinkler’s shelf company, Mulsanne Resources, in September 2012 had set in train a legal process – linear, plodding, unstoppable.
Mulsanne was just a shelf company, with no other share-holder than Bentley Resources in Singapore (in effect, another shelf company), and no substantial creditor other than ASX-listed coal company Blackwood Corporation. But if Tinkler or Mulsanne co-directors – Troy Palmer and Matt Keen – were found to have engaged in insolvent trading, they could be held personally liable for the company’s debts, or face a ban from acting as a director of an Australian company. If fraud was established, they could go to jail. Either way, the legal ramifications for Tinkler’s business empire were severe, and the damage to what was left of his business reputation could prove irreparable.
On the Thursday morning, 14 March 2013, the Supreme Court was packed to bursting. For the next day and a half, Tinkler played nice as he was grilled by liquidator’s barrister Robert Newlinds SC. Softly spoken, and asserting legal ‘privilege’ before every answer to avoid incriminating himself in any later prosecution, Tinkler could not have been more helpful – except that his whole argument was based on one-sided recollections of undocumented conversations.
Newlinds grilled him about his personal finances, to determine whether he could pay any judgement against him. Tinkler declared a taxable income of just $9834 in 2010–11, mainly interest from various bank accounts. Once again, a billionaire was revealed to be paying no tax at all.
Apart from a farm in Port Macquarie worth about $700,000, no assets were in Tinkler’s name – no other real estate, no cars, no stocks or bonds. Tinkler had a couple of joint bank accounts with his wife that had roughly a quarter of a million dollars in them. That was it.
It emerged that Tinkler got all his spending money by way of tax-free distributions from a unit trust controlled by his wife, Rebecca, as the unit holder and trustee. He identified it as the Tinkler Group Family Trust. Created in 2007, it had sold his shares in Macarthur Coal, and had paid around $100 million in tax.
Company records show no such thing as the ‘Tinkler Group Family Trust’. There is a Tinkler Group Holdings Family Trust, and there is a Tinkler Family Trust (later renamed the Oceltip Family Trust). If he’d forgotten the name, Tinkler also had no idea how much money he’d taken out of the trust in 2010–11.
Newlinds: If we rounded it to the nearest 100,000 would that help?
Tinkler: Privilege. No.
Newlinds: If we rounded it to the nearest million would it help?
Tinkler: Privilege. I couldn’t be sure.
In fact, Tinkler seemed not to know how any of it worked:
Newlinds: How do you get drawings out of the trust?
Tinkler: Privilege. I’m not sure, I’m not exactly across those, across those issues.
Newlinds: So is this what happens, your wife gives you money from time to time?
Tinkler: Privilege. I’m very lucky, yes.
This got a laugh: Tinkler was charming the room, playing dumb. It was understandable that he might be foggy about the details, but when he was asked to describe the assets and liabilities of his wife’s trust, Tinkler departed from credibility.
Until this point, everyone had assumed that Tinkler’s most valuable asset was his 19 per cent stake in Whitehaven Coal. For months journalists had been writing about the falling value of that stake –￼￼￼￼￼￼ ￼￼￼￼￼at $3 per share, it was worth about $600 million – and comparing it to the value of his reported debts against that stake, an estimated $700 million, with the obvious conclusion being that Tinkler was underwater on his major loan, and therefore close to broke. Newlinds tried to put his finger on this problem:
Newlinds: I don’t want to over-simplify things, but does the wealth of the Tinkler Group of Companies depend on the share price for Whitehaven shares at any particular time?
Tinkler: Privilege. Not really.
If true, that was a bombshell. What else did Tinkler have? On oath, Tinkler said the total amount of assets in his wife’s trust was ‘around $1.4 billion’. (In a later exchange, Newlinds erred, calling it $1.2 billion; Tinkler seemed comfortable with either figure.) When asked what was in the trust, apart from the Whitehaven stake, Tinkler identified Aston Metals, Hunter Ports and Hunter Rail, and his Patinack Farm stud, which he reckoned was worth ‘at least’ $100 million after debt.
To anybody who knew these assets, the valuation was laughable. Aston Metals was worth $50 million, tops. Hunter Ports and Hunter Rail were failed infrastructure projects, all but worthless. Patinack Farm was heavily encumbered and had twice been put on the market. With Whitehaven’s shares in the toilet, there was no way the collection of assets Tinkler identified was worth anything like $1.4 billion.
Asked to value any of the assets himself, Tinkler demurred: ‘Privilege. I guess – I deal in the strategic market, not in the marketplace per se, so I think those valuations are going to be different, but they all have very good value.’
With something like a hundred active and inactive companies in Australia alone, not to mention a dozen trusts which do not file accounts, and the possibility that assets could be squirrelled away in any number of offshore jurisdictions, it is impossible for a journalist to be definitive about Tinkler’s true wealth.
While Tinkler took an extremely generous approach in the witness box to the value of his assets, he vastly played down the extent of his debts, estimating the trust’s total liabilities at ‘around $600 million’. As would be confirmed some months later, this figure was an understatement: his major loan itself was $US634 million, not counting accumulated interest, and there were other loans as well.
In fact, while on the stand Tinkler appeared to have lost track of his borrowings.
Newlinds: So you would suggest that the trust, controlled by your wife, has a net wealth of about $600 million?
Tinkler: Privilege. Yes.
Newlinds: And if your wife chose to she could deploy some of those assets to your benefit?
Tinkler: Privilege. Some of those assets could be used, yes.
Newlinds: In recent times, recent days and weeks, did you ask your wife if perhaps she could release some funds from the trust so that you could deal with some pressing demands by creditors?
Tinkler: Privilege. No, I have not. ￼￼￼￼
￼￼￼￼￼￼￼￼Newlinds: Did your wife ask you whether, having regard to what was happening in your life, it would be advantageous to you if she gave you some money?
Tinkler: Privilege. I think it was more around liquidity than actual asset value.
Newlinds: All right, I think I understand what you’re saying. Is the position that the trust, whatever the valuations of these various assets are, is asset rich but cash poor at the moment?
Tinkler: Privilege. At the moment, so they are not yet cash flow assets.
Newlinds: Why didn’t you just go to a normal bank and ask for a loan?
Tinkler: Privilege. Normal banks do not understand my business model.
Newlinds: So that was out of the question, to go to a normal bank?
Tinkler: Privilege. It’s just out of the question for me to deal with normal banks, yes.
Newlinds: Why is that?
Tinkler: Privilege. Because I, I – they don’t understand how I create my wealth.
Newlinds: Well how do you create your wealth? Let’s see if we can understand it?
Tinkler: Privilege. I identify, I identify mining assets which I think are undervalued and bring them, you know, prove them up, build value in the asset and then identify strategic partners that would be attracted to those assets.
As Tinkler strode from court, trailed by TV cameras and a pack of reporters, the ABC reporter Conor Duffy managed to get close enough to ask a few pointed questions:
Duffy: How much financial pressure are you under Mr Tinkler?
Tinkler: No comment, thanks.
Duffy: Why don’t you pay your bills?
Tinkler: No thanks.
Duffy: Do you worry you could be the next Alan Bond?
At that, Tinkler just laughed.
It was a stunning fall from grace. In what counts for official figures in Australia, Tinkler had debuted with $426 million in 2008 at the age of 32, and peaked at $1.1 billion at the age of 35 (although, in retrospect, there is no way this was an accurate estimate of his net wealth in September 2011). Two years later, his fortune was gone. By the time the Young Rich List calculations came around again in September 2013, BRW reckoned Tinkler’s net wealth to be below its $18-million cut-off. In the 30-year history of the list, no one had ever risen so far so fast, and then, equally surprising, fallen just as quickly. He was our youngest billionaire, and our briefest.
This is an edited extract from Boganaire: The Rise and Fall of Nathan Tinkler by Paddy Manning. Published by Black Inc., available in bookstores now.