Feltex's liquidator, McDonald Vague, says it has settled its claim - potentially worth tens of millions of dollars - against five of the failed carpet maker's former directors just days before a High Court trial was due to begin.
In a brief statement, McDonald Vague says the terms of the settlement are confidential and the settlement has been reached without any admission of liability by the directors. It describes the settlement as a "modest and pragmatic" one reached on a costs saving basis.
Feltex was tipped into receivership in September 2006 when an exasperated ANZ Banking Group, which was owed A$119.5 million, lost patience, pulled the plug and appointed McGrathNicol receiver. ANZ has been reimbursed to the tune of A$116.6 million leaving just A$2.9 million plus accrued interest outstanding.
Feltex's receivership came just 27 months after the group's NZ$1.70-a-share, NZ$254 million initial public offering on the sharemarket in June 2004 when private equity group Credit Suisse First Boston Asian Merchant Partners sold out. Feltex's predominantly "ma and pa" retail shareholders lost everything. McDonald Vague was appointed liquidator in December 2006.
In a statement of claim against the five - former chairman Tim Saunders, ex-CEO Peter Thomas, and ex-directors Peter Hunter, Michael Feeney, and John Hagen - McDonald Vague said they remained "partly culpable" for the company's failure to disclose a breach of its ANZ loans despite being cleared of separate Registrar of Companies charges under the Financial Reporting Act. The five have always denied any wrong doing.
The case was set down for a three week trial in the High Court at Auckland from next Monday, May 16.
The liquidator's claims under the Companies Act, seeking the thick end of NZ$40 million, alleged - among other things that the directors - as significant Feltex shareholders - put their own interests ahead of the interests of the company itself and its creditors. McDonald Vague also maintained Feltex was "balance sheet insolvent" from October 25, 2005 until its September 2006 demise.
Read the liquidator's statement below:
The Liquidators of EXFTX Limited (formerly Feltex Carpets Limited) announce that they have entered into a full and final settlement of their claims against the company’s former directors.
The Liquidators were appointed in December 2006 and issued proceedings against the directors in 2009.
In 2010 the District Court found, after a 15 day trial concerning related issues, that the “overwhelming evidence” was that the directors had conducted themselves at all times with “unimpeachable integrity.”
The District Court’s findings naturally caused the Liquidators to reevaluate their claim, which was due to be heard in a trial starting next week in the Auckland High Court.
The Liquidators and the directors have today reached a settlement the terms of which, as is usual in such matters, are confidential. The Liquidators acknowledge that the settlement is entered into without any admission of liability by the directors. This is reflected in what is a modest and pragmatic settlement reached on a costs saving basis.