Talley's eyes major stake in Feltex

Talley's Fisheries is looking at re-capitalising Feltex, possibly ahead of a sale of the struggling carpetmaker to a rival, sources say.

The move - well outside the traditional activities of the fishing company - may suggest a shift into financial investment by the South Island Talley family.

Company director Andrew Talley did not return calls yesterday and Feltex was also unavailable for comment.

The Feltex share price hit a low this week after the company revealed it had breached banking covenants and that securing new capital was fundamental to the future of the business.

Trading in Feltex shares resumed on Monday following a halt the previous Friday, with the stock falling as low as 17c before recovering to close at 24c - down 12c on the previous week's closing price.

Feltex's share price closed down 2c yesterday at 22c a share - less than one seventh of the June 2004 float price of $1.70.

Feltex said last week that a New Zealand company wanted to take a cornerstone stake in the business. The investment was subject to due diligence from the investor which could take up to three weeks to complete.

Under the proposal, the investor would underwrite an issue of new securities to shareholders, with a placement of new securities also made on the same terms directly to the investor.

Feltex continued to meet its obligations to creditors and was generating cash, a company spokesman said.