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Feltex bonds get negative rating

By Duncan Bridgeman

Friday 9th May 2003

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Feltex Carpets' $50 million bonds issue closed over-subscribed by $10 million this week with a G6 rating by Grosvenor Financial Services.

A G6 rating could be equivalent to S&P's triple B medium grade rating, which would classify the bonds as potentially unreliable.

Investors snapped up the issue, which carried an interest rate of 10.25% for five years, three weeks early.

The issue included a right to any future initial public offering with a 1.5% interest rate step-up if that did not happen before September 30, 2005.

Feltex is using the bond's proceeds to reduce debt owed to ANZ Bank, mainly stemming from the company's $150 million purchase of Shaw Industries' Australian operations in May 2000.

The Shaws purchase helped Feltex access the synthetic carpet business in Australia but the company has since been hit by strikes, sales declines and a goodwill write-off.

Since the Shaw acquisition, the company recorded a $13 million net loss to June 2001 and an $18.3 million loss in 2001.

Feltex chairman Tim Saunders said he was delighted with the strong support shown by investors in the company.

Feltex is one of two main carpet manufacturers in New Zealand and Australia with 10 sites.

The company's head office is in Auckland, but most senior executives, including chief executive Sam Magill, are in Australia.

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