Feltex buyout offer rejected, court hears

Australian carpet maker Godfrey Hirst was a bidder that was prepared to, and could afford to, buy troubled company Feltex for its going rate before the company collapsed, the Auckland District Court heard yesterday.

Feltex's five directors, Tim Saunders, John Feeney, Peter David Hunter, Peter Thomas and John Hagen, were in court again yesterday for the second day of their trial.

The directors face two charges each under the Financial Reporting Act (FRA) for allegedly failing to disclose proper financial records for the six-month period to December 31, 2005.

Yesterday, former ANZ executive Peter Holland told the court Feltex's management and board rejected Godfrey Hirst's $141.8 million buyout offer in August 2006.

In September, after four weeks of weekly meetings, ANZ called in the receivers.

Holland said this was not an easy decision for the bank, and although the bank had a right to protect its interests as it was owed $135 million, it did carefully consider the effect a receivership would have.

Days after the receivers were called in, Feltex's assets were sold to Godfrey Hirst. Holland said the directors had co-operated and collaborated with the bank to find a solution to its problems.

The defence claims Feltex's directors thought they had met the appropriate financial reporting standards for the six-month period to December 31, 2005, and had employed accountancy firm Ernst & Young to review its records.

Ernst & Young did not tell the directors the financial reports were not in accordance with FRA requirements, the defence claims.

Director John Hagen said, in his affidavit, had the board been aware its financial records had not met the required standards, the company would have taken every necessary step to ensure its records were compliant.

Yesterday, Judge Jan Doogue ruled that documents of Ernst & Young's review of Feltex be made available to the defence to ensure a fair trial.