Commission Concludes Feltex Investigation
25 August 2006
Commission Concludes Feltex Prospectus Investigation
The Commission has conducted an investigation into the 2004 IPO Prospectus (“Prospectus”) of Feltex Carpets Limited (“FTX”) which attracted both institutional and retail investor interest.
The Commission has found no breaches of the securities laws in the Prospectus.
No further action will be taken in regard to this matter.
The Commission reviewed the Prospectus in regard to disclosure concerning projected and historical financial information, Directors’ and Vendor’s interests, and any breach of banking covenants.
The Commission obtained extensive evidence from relevant parties.
The Commission considered whether:
the projected financial information was consistent with the
- the assumptions were consistent with the New Zealand accounting standard FRS-29 requirements for projections to be reasonable; and
- the assumptions and other information disclosed in the Prospectus properly reflected the risks involved.
The Commission concluded that the Prospectus was not misleading and the assumptions met the standard of reasonableness required in respect of projections by FRS-29.
The Commission reviewed the historical financial statements in the Prospectus. The Commission also reviewed disclosure in the Prospectus of Directors’ interests, and the interests of the Vendor (Credit Suisse First Boston Asian Merchant Partners, L.P). The Commission found no evidence of breach of any disclosure obligations.
The Commission also considered whether there was any breach of banking covenants requiring disclosure in the Prospectus. The Commission found no evidence of breach by FTX of its banking covenants and therefore there was no Prospectus disclosure issue.
The Commission has not considered Companies Act 1993 compliance, nor Directors’ duties more generally, as these matters are beyond the Commission’s jurisdiction.
The Commission will continue to investigate continuous disclosure and financial reporting issues for the period subsequent to FTX’s earnings downgrade announcement of 1 April 2005.