Andrew Heathcote Rich Lists editor

Andrew is BRW's Rich lists editor and is responsible for the Rich 200 and Young Rich flagship issues. He also reports on matters relating to wealth and investment for BRW and The Australian Financial Review.

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How the rich invest: Nathan Tinkler

Published 04 October 2012 04:10, Updated 05 October 2012 05:13

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Last week BRW reported just how far Nathan Tinkler had fallen.

The former mining electrician turned billionaire lost top spot on the annual list of the 100 wealthiest self-made Australians after suffering a $730 million fall in his net wealth – equivalent to $2 million a day.

The question now shifts from how much Tinkler has lost to whether he’ll be able to get it back again.

He has already earned an reputation for having pulled off several great deals but getting himself out of his current problems may be his biggest achievement yet.

Tinkler’s investment strategy has always revolved around one word: debt.

He borrowed heavily to help pull off his first big deal, the acquisition of the Middlemount coal deposit that he later sold for $441 million in cash and he hasn’t stopped since.

Although Tinkler is judged to have a net worth of $400 million, the gross value of his assets is much greater.

He has about $630 million worth of Whitehaven Coal shares, has spent up to $300 million on racehorses, and owns property, sporting teams and a range of other assets. Some have been sold in an attempt to alleviate his cash flow problems but many of the debts remain.

Tinkler has surprised people before with his ability to pull off a big deal when others have ruled him out, so it is difficult to rule him out this time.

The investment lesson from Tinkler’s story appears to be this: building a fortune the fast way – with lots of debt – is a dangerous strategy at the best of times. It can appear to be working when markets are buoyant but leaves one exposed when they cool. Borrowers beware.

More on Nathan Tinkler

Five reasons not to discount Nathan Tinkler

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