Hart puts squeeze on trade suppliers

Billionaire Graeme Hart is forcing suppliers to Carter Holt Harvey's building products retail chain to reduce their prices as he moves to cut costs across the company's operations.

In one of the estimated 2500 letters to suppliers, Carters national timber buyer Jarrod Langstone wrote that Hart, CHH's new majority shareholder, was working with all divisions of the company to improve performance.

"As part of this review, it has been brought to our attention that Carters is behind market standards in terms of supplier rebate.

"Consequently, Carters will be introducing a rebate ... on total purchases, which we will deduct automatically off your account, effective from January 1, 2006."

In effect, Hart, who took control of CHH in September after he acquired International Paper's 51 per cent stake as part of a $3.3 billion takeover bid, is asking for suppliers to take a price cut because the chain buys so much product from them.

It replicates a move by The Warehouse chief executive Ian Morrice, who asked for discounts of as much as 10 per cent from its 3000 suppliers.

"While Carters appreciates that this may impact your business in the short term, we trust that you will support us in line with potential growth opportunities, and the continuance of existing trading for both parties in the future," Langstone wrote.

The suppliers are interpreting this last line as indicating that Carters will not continue to trade with the suppliers if they do not accept the cut.

Langstone and a CHH spokeswoman refused to comment further.

One of the suppliers said it was not in a position to give a rebate.

"Why should we, who have slogged at this business for years, make less money so that Graeme Hart can get even more ridiculously rich than he already is? They haven't even gone out and priced the market to see if our prices are competitive."

Hart has been cutting costs throughout the business. As many as 90 jobs have been cut from head office and rumours of a further 250 redundancies across the business persist.

Hart said yesterday that he controlled 85.1 per cent of CHH's shares, taking him near the 90 per cent threshold, where he can compulsorily acquire the outstanding shares. His $2.50 a share bid closes tomorrow, but he could extend it for the fifth time.

CHH shares closed yesterday unchanged at $2.50. * NZPA reports that Moody's Investors Service has downgraded CHH's credit rating from "investment grade" to "speculative grade", saying further downgrades were possible.

Moody's said yesterday the rating cut on unsecured debt to Ba1 from Baa3 was driven by uncertainty surrounding the structure of the company under its new owner, Rank.

"Moody's continues to see a material risk that CHH will be downgraded further in the near future," it said.

The prospect of further downgrades reflected uncertainty regarding the intentions of Rank.