'Do or die time' for Feltex after warning on restructuring deal

Feltex Carpets shares collapsed to a new low yesterday after the company said it could not be sure of finding a new investor and, if it did, any restructuring deal would see the shares lose significant value.

When trading resumed yesterday after Monday's trading halt, the Feltex share price fell as low as 11c before recovering to close at 13.3c a share - down from last week's close of 21c a share.

The fall means that an investor who bought $1000 worth of Feltex shares for $1.70 each at the float in 2004 now holds shares worth $78.24.

The company's market capitalisation has fallen from $254 million at the float to less than $20 million yesterday.

On Monday, Feltex halted trading in its shares "pending resolution of negotiations for a restructuring of the company".

But yesterday's update to the market contained no resolution of negotiations with a new investor or its bank. At least two potential investors have previously walked away from Feltex after examining the books.

The company said there was no certainty about terms or even that a deal would be reached.

"However, if an agreement was concluded, the value to shareholders arising from that restructuring would be materially below that at which the shares last traded," the company said.

Spokesman John Walsh said Feltex would not make any more comment until the negotiations were concluded.

Shares in the carpet-maker have plunged since the float, following several profit warnings and the recent revelations that it has breached its banking covenants.

Macquarie Equities investment director Arthur Lim said in market circles the word "materially" implied a bad number.

"I would go so far as to say it's do or die time," Lim said.

Sources have suggested two potential bidders, including Australian carpet-maker Godfrey Hirst, were interested in a deal with Feltex.

Godfrey Hirst, which was unsuccessful in a merger bid last year rumoured to be worth at least 60c a share, would not comment on the speculation yesterday.