Investors sell out of struggling carpet firm

Some Feltex investors sold out of the company yesterday rather than wait for the outcome of protracted talks aimed at saving the troubled carpet-maker from likely receivership.

Shares closed down 2.2c at 7.8c a share on the first day of trading since Feltex announced a net loss for the year ending June 30 of $57.7 million.

Macquarie Equities investment director Arthur Lim said the fact the results were unaudited was concerning, while restructuring costs were a little higher than expected.

One-off corporate costs - mainly legal and consulting - came in at $4.4 million, while restructuring costs were $13.2 million.

"The share price to me suggests that in the absence of a recapitalisation, the company is heading for receivership," Lim said.

By releasing unaudited accounts, and by writing down its goodwill, the company had made its position clear.

Goodwill reflected Feltex's ability to generate recurring earnings from its customer base, Lim said.

Feltex - which prepared the result on the assumption it was a going concern - said it wrote down $32.8 million of goodwill to zero because of its recent financial performance and reduced market capitalisation. Market capitalisation had fallen from $254 million when it was floated in June 2004 to $11.65 million yesterday.

Yesterday's 22 per cent drop in share value came after 909,079 shares - 0.6 per cent of the total issued - changed hands.

Talks aimed at recapitalising, refinancing and keeping Feltex listed on the NZX continued between Craig and Graeme Turner and ANZ Bank.

The wait for a resolution was almost like water torture, Lim said. "Every day that passes, that drop of water feels heavier and heavier."

Feltex, which has debts of more than $135 million, had hoped to wrap up negotiations last week.

The Turner deal is backed by a consortium of businessmen, including Gullivers Travel founder Andrew Bagnall and rubbish disposal group Waste Management founding director Graeme Bowkett.

It has the backing of an unnamed bank but requires the support of ANZ while new loan arrangements are put into place.

If Feltex fell into receivership, it would be rare for shareholders to get anything, Lim said.

The Turner brothers, part of the family behind the Sleepyhead bedding group, plan to subscribe to $40 million of convertible notes and underwrite an $11 million renounceable rights issue to existing shareholders at 10c each.