WordyTumble

So, it seems the plot is ever thickening when it comes to Nathan Tinkler, the Newcastle Jets and Football Federation Australia.

It seems now that the national media is picking up on the ideas I put forward when the story first broke about Nathan Tinkler’s potential liquidity issues being a major factor in his withdrawing the Jets from the A-League.

The Daily Telegraph ran a story today detailing how most of Tinkler’s wealth is on paper.  Tinkler’s mine holdings (with Aston Resources) are “undeveloped”.  That means that the coal is still in the ground.  He is essentially trading on the potential value that will come once his holdings are developed, in the mean time he’s racking up amazing amounts of debt as he takes out loans and borrows money to enjoy his billionaire lifestyle.

In another story from the Tele, linked in the comments of my previous post, there is further talk of Tinkler’s horse problems.  Specifically, they mention “Tinkler’s Patinack Farm owes a significant amount – believed to be several hundred thousand dollars – to the Australian Turf Club. The company recently had to negotiate a repayment plan for stable rental, track fees and sponsorship”.  Add that into the email I was sent (again, from the previous post) about Tinkler’s horse being withdrawn from the Golden Slipper, which asserts he did so because he “could not afford the fees” and you can start to see how this is all shaping up.

Then there’s the legal aspect.

According to the Daily Telegraph, “[l]egal experts last night revealed FFA can pursue all the companies in HSG, including the NRL club, and even sue Tinkler and Troy Palmer personally in the fallout of the company’s decision to hand back its A-League licence for the Newcastle Jets, the Knights’ stablemate”.

This is an interesting one.  I am not a lawyer, but let me spell out my understanding of how this should be playing out.

Hunter Sports Group (HSG) is a pty ltd (privately owned, not traded on the Australian Stock Exchange). The Newcastle Jets football club and the Newcastle Knights rugby league club are two separate legal entities of which Hunter Sports Group is the primary or sole shareholder.

When HSG took over the Jets, they signed contracts on which the Jets licence to enter the A-League competition was based. On Tuesday, HSG decided it would no longer honour those contracts and returned their licence to FFA, thereby withdrawing the Jets from any future A-League competition.

Now, it’s my belief that FFA is well within their grounds to sue HSG for breach of contract – depending, of course, on the specifics of what was signed which is not public knowledge at this point, but on the face of it that would follow a logical path.

As for the position of the Knights, I do not think that FFA has any grounds to include them as a named defendant in any possible legal action.  Although they are owned by HSG, the legal entity that is the Newcastle Knights rugby league club has not done business with FFA and thus there is no basis for action against them.

How they can be drawn into the fracas is by FFA mounting successful action against HSG and HSG, as a result, then not being able to fulfil their financial obligations to the Knights.  Even then, when the deal was done for HSG to take over ownership of the Newcastle Knights, it was specified that the promises made by HSG be guaranteed by other finance, namely banks.  So even if HSG is successfully sued by FFA, the Knights should still receive their $20million in promised financing from the Tinkler takeover.

What any successful action against HSG would mean for the Knights in terms of their ownership structure would, again, depend on the specifics of the contracts that were signed between the Knights and HSG during the takeover.  Once again, those specifics are not public knowledge, though I believe there is an option for the club members to buy back ownership from HSG in certain circumstances.

It’s pretty clear that this story isn’t going to go away in a hurry.  How long it’s going to drag on for is anyone’s guess at the moment, but personally I can’t see it being resolved in this calendar year.

What this means for the Knights is still up in air, but I suspect (based on my reasoning above) that their being able to at least function will not be immediately impacted.

What this means for the FFA and the administration of the round-ball game in this country is also another matter that’s up in the air.  We’ve already seen Clive Palmer state that he things FFA is headed down a path to destruction and that view was backed up today with comments from Nathan Tinkler in (yet) another Daily Telegraph story. Tinkler said that “Soccer has an ownership model of established losses, a failure by the FFA to engage with communities and no sound commercial basis for its business relationships.  These have combined to guarantee the A-League’s failure in Australia”.

To an extent it’s hard to disagree with him on that.  It would seem that FFA has some major structural problems that need to be addressed quite urgently if the A-League is going to become a viable player in Australia’s already crowded national football competition market.

In any case, this is going to be an interesting ride. Stay tuned, folks.

It was announced today, and with a reasonable amount of surprise, that Nathan Tinkler and his Hunter Sports Group would be handing back the A-League license for the Newcastle Jets to Football Federation Australia.  This would remove the team from the national competition immediately, meaning that come the start of the 2012/2013 later this year, there would be two fewer teams competing (Clive Palmer’s Gold Coast United had been removed from the league earlier under spectacular circumstances).

In a statement released this morning, Hunter Sports Group claim that this action has come as a result of “a variety of issues with the FFA including a $5 million acquisition fee, the Jason Culina insurance matter and continued request to address the competition’s unsustainable financial model”.  They go on to claim that the decision was “forced upon the HSG through an irrevocable breakdown in confidence of the current FFA management”.

Makes sense, doesn’t it?  Tinkler’s problems with FFA and their management have been well documented.  The argument over how much Hunter Sports Group paid to buy the Jets license after previous owner Con Constantine forfeited it have been well documented.  The same can be said for the issues surrounding Jason Culina, his injury and what his father (and former Jets coach), Branko, knew about it.

So it’s clear that Tinkler and the Hunter Sports Group are far from happy with FFA. And to an extent that’s understandable.

But is that all there is to this story? I suspect not.

I suspect that there is quite a bit more at play here, and it rests on the long-standing worst kept secret in Newcastle.

That being that Nathan Tinkler really isn’t as rich as we like to think he is.

The first real whiff we got that something wasn’t quite right with Tinkler and his finances came when he failed to complete a transaction required as part of his take over the Newcastle Knights rugby league club on time in the middle of last year.

At the time, the Knights board was quoted as saying “HSG directors Ken Edwards and Troy Palmer this morning advised the board of the Newcastle Knights that HSG is not in a position to complete the transaction by June 30 for a number of reasons, including an inability to pay the existing liabilities as well as an inability to provide a bank guarantee by that date”.

Eventually this was all negotiated around and the deal went through.  But it raised some questions.

It’s also known that Tinkler has sunk vast sums of money into various horse racing projects that have not paid back. (Of course, as I start searching for stories on this now, everything Tinkler related is flooded with news of the Jets. So I can’t find links right this second. I may do so later if time permits).

And even just the other week, Tinkler and one of his property development companies back out of a deal to purchase a large parcel of land at Salamander Bay because “it was not satisfied with the options the council had proposed for a section of community land on the site”.  Which is an amazingly flaky reason to back out of such a deal.

So now we circle back to the Jets and the handing back of their competition license.

Could it be just a simple tiff between the irremovable object and the irresistible force?  Or are we seeing Tinkler attempt to alleviate some of financial liabilities ahead of more liquidity problems coming to the fore?

Only time will tell, but I have my strong suspicions this latest move as more to do with the latter than the former.

UPDATE/EDIT (10 April, 1445 AEST)

So, I just received an email that raises a few more questions about Tinkler and the state of his finances:

There’s a few things in there that are quite interesting.

Firstly, I’m not all that familiar with Tinkler’s specific mine holdings, but it does stand to reason that if anything to do with them fails to pass through smoothly then he is going to hit an absolute mountain of trouble.

Secondly, outside of TinklerCorp, I’m not aware of what other property development companies around about that Tinkler has an interest in. In my experience, all the reasonably sized ones tend to be very incestuous in their ownership – they all have the same dozen or so people involved as either investors or directors.

Thirdly, the Golden Slipper thing completely passed me by because I usually don’t give two shits about horse racing (or Cash Masturbation, as I tend to call it on Twitter).  But, as it’s noted in that email, the reason stated for the withdrawal has a similar level of flakiness to that of the Salamander Bay property deal. The reason is that “Tinkler is believed to have been keen not to risk All Too Hard’s perfect win record”. Uh huh.

So there you go. Some more food for thought.