Wellington, New Zealand, June 30, 2006--Feltex's board is under fire for keeping shareholders in the dark as they await news on a potential lifeline for the troubled carpet maker that is likely to dilute their stakes, according to Stuff.co.au.
ASB Securities managing director Tim Preston hit out yesterday at Feltex's leadership over a continuation of "bizarre" events.
Last Friday Feltex acknowledged it was in breach of some terms of its ANZ bank facility.
It had received a proposal from a New Zealand firm about potential capital raising, possibly making this company Feltex's cornerstone shareholder.
The potential investor was doing due diligence, which could take three weeks. The investor could then underwrite a share issue. Feltex has declined to comment further.
Preston said not identifying the party doing due diligence left the market in limbo. Shareholders had no way of judging the potential investor's credibility.
"They've got a situation that I believe is quite untenable," he said.
First NZ Capital analyst Andrew Mortimer said the possible investor was unlikely to be an industry rival or private equity interests.
The latter would probably be put off by Feltex's debt, including a trade bill facility, of $129 million. Rivals Godfrey Hirst and Cavalier have both told BusinessDay it is not them. Mortimer said the potential investor was probably a financial player.
Any capital raising required about $30 million, Mortimer said. A capital raising would probably dilute existing shareholders, with the new investor likely to take a stake above 20 per cent, he said.
Preston said Feltex was effectively saying "trust us" to shareholders and the information it disclosed seemed to change on a weekly basis.
"I don't know why Feltex shareholders would feel inclined to trust the board or company on anything at the moment," Preston said.
Shareholders Association head of advocacy Ross Dillon said recent disclosure appeared to mirror problems dating back to Feltex's June 2004 float when the shares were sold for $1.70 each.
Dillon, with board support, successfully put a resolution to Feltex's last annual meeting removing dumped chief executive Sam Magill as a director.
If nothing had changed, backing the board's decision to fire Magill had not been a successful strategy, Dillon said. Nor had replacing Magill as chief executive with Peter Thomas or Feltex's decision to reject a reverse takeover proposal from Godfrey Hirst last year.
"At some stage, and it must be now, the board itself has its head on the line," Dillon said.
In April Feltex agreed, without admitting liability, to pay $150,000 to the NZX's regulatory arm after the NZX decided the company had not informed the market quickly enough about a severe profit fall last year.
Feltex shares closed 3 cents down at 24c yesterday, giving the company a market capitalisation of $36.5 million.
