Pressure is mounting for an independent investigation into the demise of carpetmaker Feltex in the most spectacular collapse of a public company in New Zealand in recent years.
Groups representing laid-off workers and shareholders who lost thousands of dollars are also demanding the public release of all documents relating to the company's downfall late last year. About 180 workers around the country, including 134 at Feltex's Christchurch factory, lost their jobs because of the firm's disintegration, which also left thousands of mum-and-dad shareholders an average of $29,400 out of pocket.
Australian carpet company Godfrey Hirst, whose chief executive and chairman, Rudyard (Kim) McKendrick, is an expatriate New Zealander, bought Feltex after the receivers were called in by the ANZ Bank in September last year. The Press can now reveal that Godfrey Hirst bought Feltex for $A122 million ($NZ168m). The $A52m it paid for Feltex's New Zealand business and assets was accidentally disclosed in a reply to an Official Information Act request, and yesterday Godfrey Hirst told The Press it paid another $A70m for its overseas assets.
About 8500 shareholders are being mobilised to help fund a lawsuit to sue, for as much as $250m, directors, vendors, issuers and promoters involved in the public float of Feltex in 2004. Liquidators are still trying to sort out Feltex's affairs.
Auckland investment banker Tony Gavigan, who set up a shareholder group last December to help out-of-pocket shareholders recover their losses, said he believed the last four years of Feltex's existence needed scrutiny. While his group was focusing on issues around the company's float in 2004, other matters needed to be looked at during the time of Feltex's receivership and liquidation, Gavigan said. "We will be looking hard at what happened and we want as many others to be looking as hard as possible," he said. "We want all the documents in the public arena." Christchurch lawyer Garry Wakefield, who has been advising on the shareholders' planned legal action, said a great deal of secrecy had surrounding the collapse of Feltex Carpets.
The Securities Commission was not releasing any information on its investigation. "It's a bit like saying everything is squeaky clean, but we're not telling you why or how we came to that conclusion," Wakefield said. "There should be a full inquiry, I think. I'd be 100 per cent behind that; $250 million is a hell of a lot of money for people to lose. With Feltex, it was a 100% loss for these people."
National Distribution Union (NDU) textiles sector secretary Maxine Gay said an independent inquiry would remove any doubts surrounding the acquisition. "I would most certainly support that call. I think the union was expressing that at the time," she said. "There's enough disquiet to say that it has got to be cleared up so that people do feel confident. Feltex was an iconic New Zealand company," Gay said.
The union had held some concerns about the timing of the sale to Godfrey Hirst. NDU members' redundancy payouts had been capped at $15,000 each, but if the redundancies had been announced a week later the cap would have risen to $16,500, Gay said.
Christchurch accountant Alan Robb , who specialises in company accounts, has written a report on Feltex's initial public share offering in which he concludes the company's 2004 investment statement was "misleading and deceptive". Robb said yesterday New Zealanders deserved answers about the downfall of Feltex. "It is important to investors that the financial activities of public companies are clear and understandable. This is true of prospectuses, annual reports and liquidations and receiverships," he said. "The media has a duty to be raising these questions and seeking answers."
