Potential investor pulls out of talks with Feltex

Feltex said expressions of interest had been received from other potential investors. Picture / Reuters

An unnamed investor which was sizing Feltex Carpets up to inject new capital and become a cornerstone investor has pulled out of talks, the troubled carpet manufacturer said today.

On June 23, Feltex told the market it was in breach of banking covenants and that a potential cornerstone investor was looking at the company.

"Since that date the potential investor sought to significantly revise the fundamental terms and structure of its proposal in ways, which the board believes, would have been unfair to shareholders and other stakeholders of the company," Feltex said today.

"That investor has now withdrawn its proposal."

Feltex said expressions of interest had been received from other potential investors and the company was now able to hold talks with them.

The company completed its financial results on June 30 and said preliminary financial results would be released as soon as they had been compiled and reviewed by the board.

They were expected to be in line with those foreshadowed on June 7, the company said.

"Sales in June were satisfactory in both Australia and New Zealand, slightly exceeding internal targets.

"The average daily sales volume for June 2006 was the second-highest of any month of the financial year."

Feltex said its order book remained healthy, presenting a positive short-term outlook.

"Current and projected gross margins are showing signs of improvement."

Yesterday, the company sought to reassure the market about its banking position, saying its bank had agreed to take no action over its breach of certain loan covenants.

The company said all its banking facilities -- including those that had a term expiry date of July 1 -- would continue until the end of September.

This would buy the company time to raise more capital or restructure itself. It was reporting monthly to the bank.

Feltex shares slumped from 36c on June 22 to a intra-day low of 17c the following Monday, after a news report about the breach resulted in Feltex suspending trading for a day.

The shares fell 2 cents to 20 cents today. They were issued two years ago at $1.70 each.

Analysts have estimated Feltex needed between $20 million and $60 million to keep its bank at bay.

Reports last week suggested South Island fishing company Talley's Fisheries was the unnamed investor Feltex was referring to when it said someone was carrying out due diligence on it.

The company said yesterday a successful capital raising was fundamental to the future of the business.

- NZPA