Textiles

A man with 43 years service is one of 60 employees to be axed from LWR International's Christchurch factory. Roy Williams, 58, said the mood was grim, not just for himself as "the longest server", but for his workmates with young families and mortgages.

Some were eyeing Australia for jobs, he said. He remembers the "glory days" when the Rudkin family owners of clothing-based LWR would reward employees on a Saturday with fish and chips and drinks, and when "it was a joy to come to work".

Things had tightened considerably under successive owners of the Sydenham factory, including Brierley Investments, American David Teece and now Ken Anderson.

But yesterday things got considerably tighter for Williams, who was told he will finish in the textile operations two days before Christmas. His wife died a couple of years ago, leaving him to care for a daughter, now 10. "We all got our letters just five minutes ago with a termination date on it," he said at the site. "It's just sad. It's the young ones I feel sorry for." He had already explored other work options, but said younger skilled workers were considering moving to Australia. Fourteen staff finished yesterday.

LWR chief executive Malcolm Walkinshaw said the business case for merino, polyester and other textile-making to be based in Otara, Auckland, rather than Sydenham was compelling. "We simply couldn't afford to operate duplicate textile plants in both locations. In the end, we chose Auckland because of that site's greater throughput and its space for future expansion," he said.

While the move was not prompted by the financial climate, the recent world downturn had left business leaders around New Zealand worried about the economic outlook, Walkinshaw said.

Unions fear the LWR cuts could be the beginning of a series of redundancies at small to large firms around New Zealand, with Christchurch having already seen jobs lost at G.L. Bowron, Skellerup, Dynamic Controls, Click Clack, Tip Top and Feltex.

Walkinshaw said Christchurch would retain a major manufacturing presence.

LWR have about 240 employees in Christchurch after the 60 lay-offs that will be staggered through to the first quarter of next year.

National Distribution Union organiser Kaelene Churton said there were a few others with nearly the same length of LWR service as Williams, and many other reliable workers of 20 or 30 years. "The impact that it has on people's lives for them it's going to be life-changing."

The Commerce Commission said today it had cleared Cavalier Corp and Norman Ellison Holdings to form a joint venture company that will acquire the carpet businesses of Norman Ellison and its subsidiaries. Commission chair Paula Rebstock said the watchdog was satisfied the proposed acquisition would not substantially lessen competition in any relevant market.

Auckland-based Cavalier manufactures and distributes broadloom carpets to domestic and export markets.

Norman Ellison is a privately owned and operated yarn and carpet manufacturer with tufting machinery and a yarn spinning plant in Auckland. It manufactures a range of carpets marketed under the Norman Ellison carpets brand in New Zealand and Australia. Cavalier shares were untraded today, having last traded at $3.13. They have traded between $2.96 and $3.62 in the last year.

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."

Researchers believe they may have uncovered irregularities in a web of events surrounding the purchase and sale of land in the Manawatu after the collapse of carpetmaker Feltex.

University of Sydney accountancy academic Associate Professor Sue Newberry and economics researcher Dr Bill Rosenberg, of the Campaign Against Foreign Control of Aotearoa in Christchurch, are concerned about their findings.  They have been investigating the downfall of Feltex and links with Godfrey Hirst, the Australian carpet company that targeted it for acquisition.

They say special companies 100 per cent-owned by Godfrey Hirst chairman and chief executive Kim McKendrick actually bought the two Feltex sites, not the company itself.  McKendrick is an expatriate Kiwi living in Melbourne. Godfrey Hirst is owned by the McKendrick family. 

The spectacular collapse of the New Zealand Stock Exchange-listed Feltex in September last year is still having repercussions.  Thousands of out-of-pocket shareholders are planning to sue directors, vendors, issuers and promoters involved in the public float of the company in 2004 for as much as $250 million.  The latest liquidator's report shows shareholders and unsecured creditors are owed at least $21m.

Newberry and Rosenberg are demanding answers to what they believe are two major concerns raised by Companies Office records and material released under the Official Information Act.  The first is that the sale of two Feltex properties totalling 42ha in Marton and Foxton, which required Overseas Investment Office (OIO) clearance, was not to Godfrey Hirst – as publicly stated – but to McKendrick, through two companies, Kakariki Equities and Foxton Equities, which were set up in September last year, and are 100 per cent-owned by McKendrick.

Companies Office data shows both companies were established on September 7, the day after Feltex announced that Godfrey Hirst had pulled back for the time being from its $141.8m takeover offer.  The second is the price paid for the properties.  The OIO shows the sale to McKendrick's two companies was for $5,861,058, but the price of the planned re-sale of the larger, Marton, site to a company, Kakariki Industrial Park, established on December 15 last year, is unknown, as is the level of profit on it and where the money went.

Newberry and Rosenberg believe a third concern is the corporate ownership of Godfrey Hirst New Zealand through a Vanuatu company, Olympic Pacific, owned by the McKendrick family.  Vanuatu is a well-known South Pacific tax haven favoured by Australian corporates.

According to the OIO, the application by Kakariki Equities and Foxton Equities to buy the two sites was made on October 2, and said the applicants intended to close the Kakariki scouring plant at Marton.  The plant closed last October with the loss of 44 jobs, even though OIO approval was not granted until March 30 this year.

The Feltex deal was made by John Strowger and Andrew Jessop, of Chapman Tripp in Auckland.  Strowger, who was named New Zealand's dealmaker of the year at the 2007 Australasian Law Awards this year, did not answer questions emailed to him by The Press.

The Press also put questions on the land deal to McKendrick through Godfrey Hirst's New Zealand public relations adviser, Senescall Akers, but McKendrick declined to comment.  PR spokesman Geoff Senescall said that was because Godfrey Hirst was a private company and under no obligation to answer or disclose the information.  To all intents and purposes, McKendrick and Godfrey Hirst were the same thing, Senescall said.

However, Newberry disagreed, and cited work by two Sydney University professors, Frank Clarke and Graeme Dean, which said "the notion that private companies' affairs are private, and public companies are public, is utter nonsense".  Newberry said: "Applied to this situation, it is worth noting that Feltex was a major public company and Feltex's shareholders and creditors have lost a considerable amount of money in this debacle.  "Godfrey Hirst might regard itself as a private company, but the matter is one of considerable public interest, as evidenced by the news reports and court cases."  Any suggestion that the company and McKendrick were one and the same in the land deal was flawed, Newberry said.

"It is not correct to say that McKendrick himself is Godfrey Hirst (GH), especially because the claims made before this buyout proceeded was that GH was buying Feltex as a going concern, suggesting that Feltex would continue in operation.  "Had it been disclosed that Feltex was being broken up in the buyout and that McKendrick himself was buying parts of it separately for on-selling, I suspect there would have been even greater public concern about what was happening.  "The reality is that at least these two properties were split off from the deal and McKendrick purchased them himself. McKendrick is a related party of GH, but he is not GH," Newberry said.

Rosenberg said there were questions over whether Feltex shareholders were given a "fair deal".  "The sales to McKendrick's two companies broke up Feltex's assets, apparently with McKendrick being the sole beneficiary.  "If the company was to be broken up, presumably because the assets were worth more individually than as a going concern, the receiver could have realised a greater return and the Feltex shareholders may well have been the beneficiaries.  "But there was considerable public interest in it not being broken up and it is disturbing to learn that, in fact, part of it was," Rosenberg said.

Feltex liquidators are demanding more than $20 million from directors, alleging various breaches of the Companies Act and Financial Transactions Reporting Act.  A liquidators' report reveals the total claims and outlines six possible causes of action against the directors.

McDonald Vague consultant and liquidator John Vague said yesterday there were "obviously" questions over whether the carpet maker traded while insolvent.  However, proceedings might not be filed for months and the process would be drawn out, he said.  "At present we think the total claims are $20 million plus., but that, of course, can change. It can grow, it's certainly not going to get less."

Feltex's shares were sold for $1.70 each in a June 2004 float by Credit Suisse First Boston Asian Merchant Partners, a private equity group.  The company was placed in receivership by its bank, ANZ, in September last year.  The company's assets have since been sold to rival Godfrey Hirst, which has shut two of Feltex's New Zealand factories at the cost of more than 250 jobs.

Mr Vague said the directors included three who resigned months before the receivership.  They are Craig Horricks, former chief executive Sam Magill and Fairfax Media NZ chief executive Joan Withers.  The others were Feltex directors at the time of the receivership: John Feeney, John Hagen, David Hunter, chairman Tim Saunders and Peter Thomas.

McDonald Vague's report outlines six potential breaches of the Companies Act and Financial Transactions Reporting Act.

Mr Hagen said the former directors were "quite confident" they took legal advice at appropriate times and disclosed everything that needed to be disclosed.  "(We) think any action by the liquidator would be unfounded."  Mr Saunders is overseas and did not respond to interview requests yesterday.  He is also a Contact Energy director and told its annual meeting in October last year that he was confident he acted properly at all times and in the best interests of Feltex shareholders.

"Clearly the Feltex board, and by implication myself as chairman, carry a responsibility for contributing to the demise of the company. It has been a horrible experience and not one I'd wish on anyone."  Mr Thomas, chief executive in the run-up to the liquidation, and Ms Withers had no comment.

About 8500 mum and dad shareholders in collapsed carpetmaker Feltex were yesterday asked to stump up $980 apiece to fund a lawsuit against the company's directors and two brokers who participated in its initial public offering (IPO) in May 2004.

Investment banker Tony Gavigan and Christchurch lawyer Garry Wakefield are spearheading the legal action after failing last December to prevent the High Court putting Feltex into liquidation. To issue representative proceedings, they have written to IPO investors, asking them - and those who bought Feltex shares on market before the end of March 2005 - to join the group in a bid to recover their losses. An initial payment of $600andasigned consent is required.

Gavigan says time is of the essence because some Fair Trading Act recovery rights have time limitations. About 600 Feltex investors late last year forked out $380 apiece - or $228,000 - in an abortive bid to save the company from liquidation. The balance is held in Wakefield's trust fund to cover the cost of writing to investors and bringing the action to trial. Christchurch barrister Chris McVeigh QC will act for the group and an expert opinion has been obtained from Professor Alan Robb, who recently retired from Canterbury University's accounting department.

Gavigan says the key issue is whether the IPO document painted an untrue picture of the company's accounts and future prospects. He notes the prospectus forecast a net $24 million surplus in the year ending June 2005. Instead Feltex lost the lot, he says, and reported a shortfall of $20m in the first two years. Gavigan says that rather than suing the IPO board under the directors' duties provisions of the Companies Act, he and Wakefield are concentrating on Fair Trading Act and Securities Act actions. "Just like the Ribena situation, there wasn't a lot of vitamin C in this box."

He says the group needs at least $1m to bring the matter to trial and he expects at least 1000 people to join the action. The median loss for Feltex investors is about $10,000. Included as defendants in the court action will be those directors who signed the IPO - Tim Saunders, Michael Feeney, David Hunter and Peter Thomas - and the company's vendors and lead brokers, First NZ Capital and Forsythe Barr.

Gavigan says director John Hagen will not be part of the lawsuit as he was not a director at the time of the IPO; nor will the shareholder group be suing Feltex's auditors, lawyers or any other members of the NZX. To succeed in a Fair Trading Act suit, the plaintiffs must prove misleading or deceptive conduct or conduct that is likely to mislead or deceive. The Securities Act causes of action will include technical matters required when companies issue a prospectus before seeking money from the public.

The High Court put Feltex into liquidation last December, owing at least $13.1m to unsecured and employee creditors. There was a $A19m shortfall to the debenture holder, the ANZ Bank. This followed a fierce courtroom battle between Gavigan and the would-be liquidators, insolvency specialists McDonald Vague and Associates.

Gavigan was seeking a court order to become a Feltex director. This, he said, would have enabled him to resuscitate the company by calling a shareholders' meeting, appointing more directors, relisting and recapitalising Feltex, auditing its expenditure and the actions of its directors for the past six years, investigating the IPO and the claims made in its prospectus, coming to a scheme of arrangement with creditors and recasting Feltex's most recent accounts. There was at least $50m in value remaining in the company in the form of tax losses, he told the court. But Justice Rodney Hansen said the law was clear. If Feltex was insolvent, it had to be liquidated.