ANZ wanted Feltex merger in early 2006

ANZ Bank was pushing for Feltex to be sold to rival Godfrey Hirst early in 2006 as the carpet marker’s financial position deteriorated, according to a former senior executive at the bank.

Peter Holland, former head of ANZ's corporate portfolio management, yesterday gave further evidence at the trial of five former Feltex directors – Tim Saunders, Peter Thomas, Peter Hunter, John Hagen and Michael Feeney.

The five have pleaded not guilty two charges under the Financial Reporting Act.
Mr Holland said by February 2006, as the Feltex board was preparing its financial statements for the December 2005 half year, the ANZ was preparing to take a loss on its loan to the company.

An independent report prepared for the bank by McGrath Nicol said if Feletx was liquidated the ANZ could lose $A64 million, about half the bank’s exposure of $A120 million.

Should Feltex continue to operate the bank could pare its potential losses to $34.3 million, Mr Holland said the report said.

Godfrey Hirst Carpets had already made several offers to buy parts of Feltex, but management rejected it. Feltex had also considered breaking up the business.

Correspondence between the senor banking executives working on the Feltex account indicated the bank had serious concerns that it would be repaid the debt owed.

“A trade sale looked like the best way for the bank to get out,” Mr Holland said
A bank memo dated March 2006 discussed covenant breaches at Feltex and a meeting was called between the bank and Mr Saunders the following day.

Mr Holland said he was primarily concerned with the bank getting its money back but any review of Feltex’s banking facilities had to wait until a third report from McGrath Nicol was completed.

“Clearly some action had to be taken on the account,” Mr Holland said.
By June 2006, Feltex was trying to source new equity through a deal with the Talley’s Group.