Cavalier Corporation's sale of its South Auckland manufacturing plant has hit a major snag with the purchaser failing to settle on the deal on Friday.
Kinleith Land and Infrastructure, which is owned by investment company Kinleith Continuation and directed by David Henry, had entered into a sale and purchase agreement but failed to come up with the $24 million by deadline.
Cavalier, which planned the sale and leaseback to fund a wool and natural fibre strategy and reduce debt, said it has served a settlement notice on Kinleith.
"Kinleith is in default under the sale and purchase agreement and now has 12 working days to remedy the default," Cavalier said in an NZX statement this morning.
"In the meantime, Cavalier will be exploring all options, including the legal remedies that are available to it should Kinleith fail to remedy the default within the stipulated timeframe.
"Despite the disappointing development, Cavalier is confident that it will be able to sell the Auckland property, especially with the buoyant property market and the level of interest expressed by other interested parties."
Chief executive Paul Alston told the Herald the situation was frustrating given all the work that had gone into getting the site prepped for sale.
"There wasn't a deposit paid. It was all based on them getting all of the funding and paying all at once on Friday.
A deposit had been part of the initial agreement, he said but "I guess a commercial decision was made to wait for the funds to all come at once. That was the commitment from the other side, so you either cancel at that point in time or wait a couple of weeks until the funds come."
"We've been given every assurance that they will settle and they have 12 days to do so. If they don't then we are getting advice to see what our options are."
On September 28 Cavalier reported a net loss after tax of $21.5m with profitability hit by the Covid-19 lockdown. However, the full-year accounts have yet to receive auditor sign off.
Cavalier last week announced its trading for the first quarter had been stronger than anticipated with sales revenue up 3 per cent on the same time last year.
Today the company said its net debt had continued to decrease significantly - from $14.5m as at the end of June to $1.4m as at the end of October.
Alston said the company had paid down all its bank debt.
Chairman George Adams said there remained continued interest from a number of parties in the Auckland property.
"While it is disappointing and inconvenient that this transaction has not settled yet, we are moving ahead with the implementation of our strategy, including the rollout of the new Bremworth brand which was unveiled last week," Adams said.
"While the future economic environment remains uncertain, our near term outlook has improved. Cavalier is ideally placed to meet the growing consumer demand for desirable, high performing, safe and sustainable interior products and we are excited about the opportunities for our company."
Kinleith director David Henry could not be reached for comment.
This is not the first settlement failure he has been involved in recently.
Another company he's involved with - New Zealand Future Forest Products (NZFFP) – failed to settle on a $126m deal to buy wood processing business Claymark Group out of receivership.
Claymark was instead sold to a consortium headed by Rotorua businessman Paul Pederson for a total of $59m.