GPG's Coats loses appeal on European market-fixing
Global thread-maker Coats, Guinness Peat Group's largest remaining asset, has lost a crucial appeal in the European Court of Justice and faces fines and interest totalling 138 million euros, well in excess of provisioning.
Coats had appealed an original decision that found in 2007 that the company entered into a market sharing agreement in the European haberdashery market between 1977 and 1998.
Coats maintains the allegations are "unfounded" and described the judgment as "extremely disappointing." It is considering whether a further appeal should be mounted.
Shares of GPG dropped 3.3 percent to 44 cents on the NZX today and have declined 22 percent this year.
The original fine of 110 million euros has attracted a further 28 million euros of interest while the appeal process played out, taking the total cost to Coats of the decision to 138 million euros.
The company had already provisioned 45 million euros against the possibility of an adverse judgment, "leaving an additional 93 million euros to be provided and accounted for in Coats half year figures to 30 June 2012," GPG said in a statement.
Coats will treat 65 million euros of that total as an exceptional item within operating profit, and 28 million euros will be treated as an exceptional interest cost.
The company said it had refinanced its senior debt facilities in October 2011, making allowance for the possibility of an unfavourable judgment and "has more than adequate banking facilities to allow it to pay the fine."
GPG has been conducting a disposal of all of its assets, with decisions still pending on how to approach the Coats assets.
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