ANZ will get its Feltex $140m

ANZ Bank will recover its entire $140 million loan to Feltex as part of a deal the carpet-maker's receiver struck to sell the firm to Australia's Godfrey Hirst.

Colin Nicol, partner of receiver McGrathNicol, said Godfrey Hirst had agreed to cover ANZ's loan and employee entitlements when it took over the business next month.

But creditors owed $7.5 million will suffer a loss. Meanwhile, workers at plants in Kakariki near Marton and Christchurch will lose their jobs, taking total losses in this country to at least 123. The job losses - negotiated as part of the sale - represent 15 per cent of the carpet-maker's New Zealand workforce.

"The receivers are pleased to have been able to sell the Feltex business to a party with specialised expertise and financial strength, which will provide an exciting long-term future for Feltex's employees, suppliers and customers," Nicol said.

The ANZ's recovery is in sharp contrast to expectations that ANZ would have to write off some of its loan to rid itself of Feltex. The turn-around may in part reflect the statutory protections the bank gets in a receivership.

The deal will create one of the largest transtasman carpet groups, with more than $700 million of sales, an estimated 50 per cent share of wool and synthetic carpets in Australia and 50 per cent of the wool carpet market here.

It starts to draw to a close a disaster that began to unfold when the carpet-maker was hit by a downturn in its key Australian market last year. The losses add to the more than $250 million loss in the carpet-maker's share market value since it was floated on the NZX at $1.70 a share in 2004. Feltex's shares were suspended last month at 3c.

The Australian operations - which had been significantly restructured under Feltex's prior management - have for the moment escaped the chop. But the new owners are not ruling out further cuts.

"Over the next few months, we will carefully and closely examine all aspects of the Feltex operation," said Godfrey Hirst New Zealand general manager Tania Pauling.

"We are pleased this matter has finally reached a conclusion. The outcome will ensure that in the immediate future certainty is returned to employees, customers and suppliers."

The deal represents a significant victory for Godfrey Hirst, which was advised in New Zealand by investment bank UBS. Hirst first approached the Feltex board with an offer to buy the company in the middle of last year. This offer would have seen Godfrey Hirst backed into Feltex in a deal that could have valued Feltex's shares at 60c apiece.

It withdrew from negotiations at the start of this year and sold down its 8.7 per cent stake. However, after it emerged that Feltex was in breach of its banking covenants it returned to the negotiating table.

These talks stalled after Hirst said it had material concerns after a detailed analysis of the operations. It also said it had no wish to enter the bidding against a rival consortium of wealthy New Zealand businessmen.

This consortium, led by Graeme and Craig Turner, principals of the Sleepyhead bedding group, sought to keep the company listed on the NZX. But the deal foundered.