Editorial: Loyalty not at issue in Feltex saga

Opinion

No bank calls in a loan without considerable consideration. The consequences are fraught, for the owners and staff of the failed business and, potentially, for the bank's reputation. The more so if it is an Australian bank dictating the fortunes of a New Zealand company bearing the name of a household brand. It can be assumed, therefore, that the ANZ, Feltex's bank, thought long and hard before putting the carpet-maker into receivership. Given the patriotic drums being beaten by a rescue bid fronted by local entrepreneurs Craig and Graeme Turner, it must have known it would be vilified.

As much duly happened. Feltex's chairman wasted no time claiming the ANZ had greater loyalty to Australian businesses, such as rival bidder Godfrey Hirst, than to a New Zealand one. Others tilted similarly at the bank's commitment and standing. It was all misplaced. The ANZ's action was surely not the result of a bias towards things Australian or an unwillingness to support local business. Given what was at stake, the catalyst must have been, purely and simply, the inadequacy of the Turner consortium's bid.

If the receivership came as a surprise, it was because the Turners, part of the family behind the Sleepyhead bedding group, had repeatedly insisted a deal was near. Such had been their impact as a perceived white knight that Godfrey Hirst, Feltex's arch-rival and the most logical buyer, had decamped. Gone from the table was its offer, accepted earlier by Feltex and agreed to by the ANZ, that would have seen shareholders paid up to 12c a share.

It now seems apparent the Turner consortium's bid was strong on promise but light on content. The blaze of publicity greeting its arrival was not accompanied by financial credentials that would make it acceptable to a bank owed almost $140 million. Indeed, it seems that it would have required the ANZ to write off significant debt. Perhaps the consortium calculated that, given the sentiments aroused by its bid, the bank would have little option but to accept its terms, no matter the deficiencies.

For Feltex shareholders, this is far from incidental. The consortium offered hope, but now that has been dashed, they stand to receive far less than would have been the case had the Godfrey Hirst offer stood. While both that company and the Turners have presented the receiver with formal expressions of interest, the Australian concern must now be favoured to take control.

It has logic on its side. The Turner consortium has no experience of carpet-making. Godfrey Hirst, in contrast, is well able to assess Feltex and determine the capital expenditure - in addition to retirement of bank debt - required to make best use of synergies between the two companies. Equally, a company able to extract such benefits is likely to be prepared to pay more for Feltex than a consortium unassociated with the carpet trade.

Craig Turner portrayed the receivership as a disaster and a tragedy. "What about those people in central New Zealand, what about all those people, what about those creditors - they're the people we've got to be concerned for," he said. In fact, the receivers suggest a strong new owner will be in place by November. If so, ANZ will, as it has insisted, have done what is best for Feltex.

In all likelihood, Godfrey Hirst will secure control on far better terms for it than would have been the case last month. For shareholders, this will be another blow, one of many since they paid $1.70 a share in 2004, when the private equity arm of Credit Suisse First Boston sold Feltex to the public. Twelve cents a share must now seem far more acceptable.

Several parties can be blamed for what has become a miserable episode and a blight on the credibility of the sharemarket. Sober analysis would suggest some are far more culpable than the ANZ.