ANZ Bank briefed its top risk management division over concerns about loans to Feltex Carpets in June 2005, the Auckland District Court heard today.
The former head of corporate portfolio management at ANZ, Peter Holland, said he received a call on June 22 from the bank’s institutional division saying he could be called in to oversee the account.
At that point Feltex had debt to the ANZ of more than $150 million.
Mr Holland, called as the first witness in a criminal trial against five former Feltex directors, said he was responsible for “problematic or distressed loans” at the bank.
Typically he was called in to monitor loans when an account’s risk assessment reached seven out of ten. But in the Feltex case he and his team began "shadowing" the financial situation from the lower risk rating of 4.
Mr Holland said he had already worked on the account in 2002, before the company’s IPO but the company went to the back of the bank’s radar in 2003 after some earnings improvement.
But in June 2005, Feltex issued its first profit warning and the bank contacted Mr Holland.
“The conversation indicated we could be called in to manage the file,” he said.
Mr Holland’s evidence, which continues this afternoon, is a key aspect of the prosecutions case.
The registrar of companies has laid criminal charges against former chief executive Peter Thomas, and directors Peter Hunter, Michael Feeney, John Hagen and former chairman Tim Saunders. They have pleaded not guilty.
The registrar alleges Feltex's interim statement for the six-month period ended December 31, 2005, didn't comply with reporting standards relating to the classification of $155.7 million owed to the ANZ.
The registrar alleges the Feltex directors failed to disclose an ANZ Bank debt facility as a "current" liability and did not disclose a breach of financial covenants during that period.
Feltex went into receivership in September 2006 and subsequently into liquidation in December 2006.
When Feltex was floated in 2004, more than $250 million was raised from mostly New Zealand investors.
Following an inquiry by the Securities Commission into the initial Feltex share float and the company's compliance with financial reporting standards, the matter was referred to the registrar's national enforcement unit for further investigation.
Mr Holland was head of corporate portfolio management at ANZ from June 2001 until September 2008.
Before taking up his banking career Mr Holland was a qualified accountant, working for KPMG’s Wellington office for 10 years.
His role was to initially “shadow” and provide oversight to accounts, before they moved under the bank’s direct control.
Please note: Comments have been deactivated from Feltex stories while the trial continues.
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