Turners beat bid deadline for Feltex

The future of Feltex was on a knife-edge last night as a consortium led by the wealthy Auckland businessmen Graeme and Craig Turner waited for a verdict on their proposed rescue bid for the troubled carpetmaker.

A spokeswoman for the Turner consortium said: "The bid is being considered by the board."

The offer came after Feltex's bank ANZ decided yesterday morning to call time on the protracted rescue negotiations. In a chilling sign to Feltex's shareholders and its creditors, it blocked the carpet maker from drawing on its loan facilities and told potential bidders to lodge "fully-funded" proposals to resolve the company's future by 8am today.

This new deadline followed ANZ's threat earlier in the week that it reserved its right to call in its loans and scuttled the Turners' plans to lodge a bid with the board by today.

Feltex told the NZX yesterday morning: "The [bank's] position is to be reviewed by the ANZ on Friday. The company is able to make payments from its cash balances but this means that payments to some suppliers may be deferred."

It said Australia's Godfrey Hirst , which last month offered to buy Feltex's assets for $141.8 million, had decided not to lodge a bid. This suggests Godfrey Hirst anticipates the Turners' offer will not satisfy ANZ and wants to take a chance on buying Feltex assets out of receivership.

Feltex however said that trading performance was strong. "August sales exceeded budget and the forward sales order book remains healthy."

Its shares fell 0.3c to 8.8c - well off its 2004 float price of $1.70.

Feltex was caught out by the speed and extent of the trading downturn at the start of 2005. Since then, it has issued a string of profit warnings and breached its banking covenants.

Feltex's 1400 staff, including 550 in Australia, were also nervously awaiting the outcome of the rescue talks. The union representing the bulk of workers said it would work with any potential owners to ensure workers keep their jobs.

"We believe it's very likely there'll be an offer from the Turners, and we're hopeful that offer will enable Feltex to keep going as a viable company," National Distribution Union national secretary Laila Harre said.

"The fundamental problem's arisen from the debt situation created by the original share float."

Feltex remained a valuable company from a production point of view with a skilled and experienced workforce, she said. Management had kept in touch with the union, which represents about 700 of Feltex's 850 New Zealand staff.

There would probably be a number of contenders for the business if Feltex went into receivership, she said.

"We would work with any potential owners, or interested owners, to ensure that workers not only maintain their jobs but maintain their conditions of employment."

Godfrey Hirst began to go cold on the deal earlier this week when it said it had run into "material" hurdles as it conducted due diligence on the business. It had offered to pay $141.8m for Feltex's carpet-making operations, but that price increased or decreased according to the company's working capital position at settlement date.

That meant Feltex shareholders could technically get nothing, or up to 12c a share. Godfrey Hirst said it remained a "willing buyer" but only in an environment that was "more conducive to a successful sales process".

It was also reluctant to put forward a bid that would have helped the Sleepyhead consortium pitch its offer.

Feltex

Publicly listed company.

Largest shareholders: Clients of Forsyth Barr and First NZ Capital, the investment banks that floated the company in 2004 at $1.70 a share; followed by South Island businessman Allan Hubbard.

Head office: Melbourne, Victoria.

The second largest carpet-maker in Australasia after Godfrey Hirst.

Chairman: Tim Saunders. Chief executive: Peter Thomas.

Sales: $266 million (est).

- additional reporting NZPA