Pressure On Feltex from all Sides

Wellington, New Zealand, September 5, 2006--The squeeze is on carpet maker Feltex from both its banker, ANZ, and angry shareholders. ANZ is reserving the right to take action if the company fails to progress a rescue bid "expeditiously," according to an update the company provided early today to the sharemarket. That update was made as angry shareholders met in Auckland. New Zealand Shareholders' Association chairman Bruce Sheppard said shareholders were calling the bank's bluff. The shareholder group is small, representing just 2 million shares, but it decided to rally support to call an extraordinary general meeting to remove all but one director and stop any prospect of the board liquidating the company. Mr Sheppard is arguing a liquidation would reduce the ability of shareholders to seek redress and that the bank is better off if the business is kept running as a going concern. ANZ is worried that "a bird in the hand is becoming two birds in the bush," with respect to rescue options, said Arthur Lim of Macquarie Equities. The bird in the hand is Australian carpet maker Godfrey Hirst, which in August said it would offer a $141.8 million rescue package subject to a check of the books and shareholder and regulatory approvals. Then New Zealand businessmen Graeme and Craig Turner of bedmaker Sleepyhead asked to look at the books too and said last Friday they would put a proposal to the board by next Friday. Brokers said ANZ appeared concerned that the whole process was taking too long and that the Turner's offer might lose the company the Godfrey Hirst offer. Both Godfrey Hirst and the Turners finished looking at the books last Wednesday. Feltex advised this morning that ANZ sent a letter to the company after the close of business on Friday saying it wanted confirmation that Feltex and Godfrey Hirst had resolved outstanding issues and details of steps toward a sale completion by October 20. "The ANZ further advised that if Feltex and Godfrey Hirst were not in a position to confirm this to the ANZ by 9am this morning, then the ANZ reserved all of its rights in respect of any past or current events of default by Feltex, including the right to withdraw its agreement not to take any action in respect of such events of default," Feltex said. Feltex breached it banking agreement with ANZ in June and owes the bank about $129 million. Feltex said today that Godfrey Hirst was considering material concerns it had after seeing the company's books. It had also advised Feltex that it did not see any value in signing formal sale documentation while there remained a possibility of an alternative competing proposal from the Turners or any other party. "Godfrey Hirst has advised Feltex that it is considering its position in relation to its further participation in the process and is unwilling to provide any certainty regarding its proposal at this stage," Feltex said. This has been advised to ANZ and Feltex is expecting to hear back from the bank again. The Godfrey Hirst bid gives shareholders who paid $1.70 a share in the float of the company two years ago a maximum of just 12c a share once the bankers are paid and takes the company off market. The Turner's bid is expected to keep the company listed and give shareholders a ride in the future. The informal meeting of shareholders had a show of hands about the Godfrey Hirst offer and Mr Sheppard said only about 50 per cent were in favour. The Godfrey Hirst offer needs 75 per cent shareholder approval at a meeting in September. An extraordinary general meeting (EGM) can be called if 5 per cent of shareholders support it. Shareholders wanted cash left in the company to pursue directors, brokers, auditors, and the vendors. "We want to avoid liquidation," Mr Sheppard said.