Feltex needs to raise up to $60m, say analysts

Analysts estimate troubled carpet maker Feltex needs between $20 million and $60 million from a proposed capital raising.

Trading in the company's shares was suspended on Friday after a news article reported Feltex needed new capital and was in breach of its banking covenants.

A company spokesman said that while Feltex would continue to face difficult times it was meeting its financial obligations to banks and creditors.

The company said an unnamed investor wanted to take a cornerstone stake in the company -- subject to due diligence -- and a successful capital raising was fundamental to the future of the business.

When trading in the shares recommenced yesterday they fell as much as 17c at one stage before ending down 12c to 24c.

Today The Dominion Post newspaper reported one analyst saying Feltex needed to raise up to $60 million, or 37.5c for each existing share, to stave off its bank, the ANZ. Another suggested Feltex needed a figure nearer $20 million.

An official from the National Distribution Union, which represents about 700 of Feltex's 890 New Zealand staff, said the union was "quite worried" about Feltex.

She feared New Zealand jobs could be lost to Australia, where Feltex has operations, or China.

Feltex chairman Tim Saunders and chief executive Peter Thomas were again unavailable for comment yesterday.

First NZ Capital analyst Andrew Mortimer told The New Zealand Herald Feltex needed to get its capital structure sorted out before the share price could perform.

Another analyst said the three weeks in which the potential investor conducted due diligence would be crucial for Feltex.

"The real risk for them is the investor having had a chance to look through their books just walks away," said the analyst.

Investor confidence in Feltex was shattered last year by a series of profit warnings.

Many investors felt they had been duped into buying the stock at $1.70 in an Initial Public Offering in 2004 shortly before things turned to custard.

In October, the company axed 235 jobs, mostly in Australia, and this year it abandoned merger talks with Australian competitor Godfrey Hirst after Feltex suggested the apparent "white knight" investor was more interested in a reverse takeover. Godfrey Hirst later quit its 9 per cent stake.

Feltex employs over 1000 people on both sides of the Tasman, with plants in Feilding, Kakariki near Marton, Foxton, Dannevirke, Lower Hutt and Christchurch.

- NZPA