What the banker saw

SINCE someone else has already written a two-act farce titled <i>What the Butler Saw</i>, there’s not much point in <i>Hogsback</i> following up with a story about Whitehaven Coal called “What the Banker Saw”.

Staff Reporter

There is, however, a very good reason to ask that question because when Whitehaven’s major shareholder, Nathan Tinkler, last week dropped his proposed $5.20 per share takeover bid for the coal miner it is reasonable to assume someone saw something they did not like.

Either Tinkler (and a syndicate of friends and financiers) decided he did not want to own all of Whitehaven, or the bankers behind Tinkler and friends decided they did not like the outlook for coal or the ability of the bidding syndicate to service its debts at future forecast coal prices.

Whatever the banker saw it is unfair that other shareholders in Whitehaven are not being told what it was that caused the removal of the $5.20ps carrot that had been supporting the Whitehaven share price.

Until last Friday there was a belief in the stock market that Tinkler and friends would proceed with their proposed bid and why wouldn’t they?

Repeated reports about the deal possibly falling over had been rejected. All is well, inquirers were told, except they obviously were not well.

Seasoned observers of the mining industry and the stock market, such as The Hog, sensed something was not quite right and this column suggested just that in its August 10 edition (Tinkler’s Whitehaven hopes fade), a day when the company’s share closed at $3.85.

For the next few days, Whitehaven shares continued to creep higher, with some investors clinging to the belief that if they paid around $3.80 or as much as $3.88 on August 16, they would ultimately get the proposed $5.20 and trouser a handy 33% gain on their outlay.

It was, as we now all know, not to happen.

Despite assurances all the way to the extended August 24 deadline Whitehaven management dropped its three-paragraph “bid off” bombshell at 9.01am in the morning.

It then proceeded to flood the ASX inbox with four additional statements.

Five minutes after the “bid off” confirmation came a coal resource and reserve update, followed 37 minutes later by Whitehaven’s 2012 financial year profit statement, followed one minute later by a formal results announcement and two minutes later by a results presentation.

The official release times of the announcements was probably a function of the ASX computer suffering Whitehaven overload and while shareholders cannot complain about a company telling them too much they can complain about not knowing the most important fact of all – “what did the bankers see”

The reason the banker view of Tinkler and Whitehaven is important is that the two are effectively inseparable at the moment.

Tinkler, with the backing of his financiers, is the biggest single shareholder in the coal miner with a 21.4% stake in the stock.

What Tinkler’s decision means to not proceed with his proposed $5.20ps takeover bid for Whitehaven is either:

  • He hasn’t got the money to pay $5.20
  • He couldn’t get bank support for a bid at that price
  • That the Whitehaven share price will struggle to get back to its high of $5.62 reached as recently as April 13 (and yes, that was a Friday).

If The Hog was a Whitehaven shareholder he would be feeling somewhat miffed about what has just happened and uncertain about what might happen as Tinkler and friends consider their options.

Tinkler himself is showing the classic signs of an entrepreneur who has tried to pull off one deal too many, not helped by the falling coal price and his apparently large debt levels.

According to some reports, he is carrying “up to $638 million” in debts, a figure reported on August 25 by The Sydney Morning Herald.

Much of it is said to be owed to a New York-based private capital firm, Farallon Capital, along with GE Capital and Westpac.

If that debt-level estimate is right then Tinkler’s position has been made very difficult by the fall in the Whitehaven share price since the $5.20 bid disappeared, because at the latest price of $3.26, all of Whitehaven is valued at $3.3 billion and Tinkler’s 21.4% is valued at $707 million.

In theory, assuming the numbers are correct, that means Tinkler’s “paper profit” on his Whitehaven shares is just $69 million – somewhat less than the $1 billion estimates of a few months ago.

Whitehaven shareholders not associated with the Tinkler camp, or the company’s management, deserve to know a lot more about the financial position of the biggest shareholder in their company.

For example, if Tinkler is no longer a buyer has he become a seller? If so when and why?

Or is that something else that only his banks are allowed to know?


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A growing series of reports, each focused on a key discussion point for the mining sector, brought to you by the Mining Monthly Intelligence team.


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