Synlait Milk has successfully secured debt refinancing with its creditors, marking a crucial step toward ensuring the survival of this New Zealand-based dairy company. The completion of new banking facilities represents a key condition outlined by The A2 Milk Co. earlier this year to resolve a prolonged contractual and pricing conflict with Synlait.
In August, Synlait announced a successful equity raise of NZ$272 million ($168.2 million), with A2 Milk committing to participate as the company’s second-largest shareholder. This equity initiative is equally essential for the resolution of the previous contractual disagreements.
A special meeting for Synlait’s shareholders is scheduled for Wednesday, September 18, where they will vote on the proposed equity raise. If approved, the agreement with A2 Milk will become “unconditional” following the completion of this financing, which is also a prerequisite for moving forward with the debt refinancing set by the banking consortium.
The resolution of these matters is anticipated to be finalized by October 1. Synlait, headquartered in Wellington and publicly listed on both the New Zealand and Australian stock exchanges, is poised for recovery amid these developments.
CEO Grant Watson, in a statement released on September 16, expressed optimism, stating, “The new bank refinancing is another positive step forward in Synlait’s business recovery plan and actions to deleverage our company.”
In conjunction with this, China’s Bright Dairy plans to increase its stake in Synlait from 39% to 65.3% through participation in the equity raise, thus positioning itself as the largest shareholder, ahead of A2 Milk. Bright Dairy has also previously provided a NZ$130 million bailout loan to support Synlait’s operations.
The new debt facilities will take the place of existing loans and supplement the Bright Dairy loan drawn in July. Among the financial institutions involved in these new banking arrangements are ANZ, Bank of China, Bank of Communications, China Construction Bank, HSBC, Industrial and Commercial Bank of China, Kiwibank, and Rabobank.
The total amount of the banking syndicate loans reaches NZ$450 million, which includes a working capital facility of NZ$160 million, a revolving credit facility of NZ$205 million, and a term loan of NZ$75 million, alongside an on-demand bilateral facility of NZ$10 million.
Additionally, Synlait holds NZ$180 million in five-year unsecured, subordinated bonds, which may be subject to early redemption rights triggered by the forthcoming equity raise considered by shareholders. The proceeds from the equity initiative, along with certain portions of the new facilities, will be allocated towards repaying existing bank debt and bonds.
This refinancing agreement is a significant event in the context of evolving trends within the food and beverage industry, indicating the ongoing adjustments businesses must make to navigate current market challenges. The situation underscores the importance of strategic financial planning and investor engagement in the food and drink business, aimed at enhancing operational sustainability amid shifting consumer trends.
