Behind the Feltex rescue bid

The receiver for Feltex said Sleepyhead's Turner brothers had been economical with the truth about their rescue bid for the beleaguered carpet maker.

He also said there was an excellent chance of selling the company as a going concern, with few redundancies, and that the Turners and former bidder, Australasian carpet maker Godfrey Hirst, were back in the hunt for the iconic Kiwi brand.

Colin Nicol of insolvency specialist McGrathNicol+Partners was appointed on Friday by the ANZ bank, as receiver to the Australian and New Zealand operations of Feltex. The bank, owed $136 million by Feltex, said despite "lengthy discussions" over proposals to rescue the company, a deal could not be finalised.

The Turners have said the decision to put Feltex into receivership is a disaster. Yesterday Todd Strathdee, managing director of D.B. Zwirn, which is leading the consortium of investors behind the Turners, said certainly "no-one is happy" with the move. "The simple thing is that throughout, ANZ would not engage with us when we tried to negotiate finality to terms. It is not us that is to blame for matters (not) being finalised."

Colin Nicol would apparently beg to differ. "A lot of the information that I've seen from the Turners, I don't believe is entirely the full picture, or in all cases an accurate picture."

Despite it all, Nicol said both the Turner camp and Godfrey Hirst have reaffirmed their interest in buying Feltex. He said the receivers have set in train a process to consider formal offers from both parties.

He described the receivership as far from a disaster. He said it was business as usual for Feltex, with suppliers, customers and employees all supporting the receivers. "In fact I suspect there's a degree of relief from a number of those parties that now there's a bit of certainty about the outcome."

Nicol was, under the circumstances, upbeat about Feltex's future. He said operations were continuing as normal, and there were no difficulties with trading. "We're very confident that there'll be a going concern sale of Feltex or a recapitalisation at the outcome of this process."

The receiver criticised comments from Feltex chairman Tim Saunders at a press conference in Auckland on Friday regarding employees' futures, saying they were "irresponsible".

Saunders said he was "deeply concerned" for Feltex's 820 New Zealand and 520 Australian staff.

"To talk about being fearful for the employees, there's no basis for that fear - employees are in good shape here," said Nicol.

However he said Feltex is insolvent.

The carpet maker reported a $57.7 million loss for the year to June, compared with a profit of $12 million the previous year. The loss was due to a 10 per cent drop in revenue, $13 million in restructuring costs, and a $35.2 million write-down of its Australian assets. The company said it had adjusted the value of its goodwill to zero.

Nicol said the rot goes much deeper than that. He said the company had sustained losses over many years. "It has had lots and lots of performance problems. It's lost a lot of ground against its competitors in recent years.

"But it's definitely saleable."

Nicol wanted Feltex's shares suspended from the New Zealand stock exchange. The receivers asked for a trading halt on Friday, but said they were told by the NZX that receivership per se wasn't a reason for suspension. Feltex shares plunged from nine cents to three cents. Nicol said they were in discussions with NZX about the situation. "My view is the company is insolvent. How can it therefore be that the shares have value?"

The ANZ has taken considerable public flak for what many saw as a pulling of the plug on a Kiwi icon. The messageboard of the Turner brothers' website on their bid has gone blue with abuse. "ANZ is as low as they can go", "Anti-New Zealand Bank would be a good name for this bunch of !!!!!!!!", "ANZ bank sux", "I for one will be changing banks after this 'over'!!", read a sample of the comments.

Officially, ANZ said it could not comment on a client relationship. Unofficially, the Herald on Sunday understands it was frustrated that the Turners and Co. were being seen as white knights.

Colin Nicol said the Turner bid was neither unconditional nor fully funded. Sources told the Herald on Sunday that one of the conditions of the Turner deal was that should another bidder have come into the frame with a higher offer, ANZ would have needed to stump up with the difference. "They weren't doing it for the good of their health," the source said.

Todd Strathdee denied this. "As it's said, that is not correct."

He said things kept changing. The ANZ asked the consortium to look at a different process other than its original proposal, which was to put its recapitalisation plan - $80 million of core debt put up by the BNZ, and $63.5 million of equity and debt put up by the consortium - to a shareholder vote.

"We were doing back flips and forward flips, and we just didn't know where we were. So it's difficult factually for (people) to say that our bid was not unconditional. More precisely we were not engaged with by the bank so that we could produce them an unconditional bid."

Strathdee said the consortium would be meeting with the receivers tomorrow. He said Nicol "may well be right" when he said trading at Feltex was in good heart, but he said the consortium's information was that it's getting tougher by the day. "The clock is ticking. There are some real difficulties at the business level starting to emerge so everyone needs to put their hand to the tiller pretty quickly."