SML - Synlait

[Minimoke]

Cannot be clearer about the CR than from the announcement yesterday :

Proposed equity capital raising to help reset Synlait's
balance sheet

To ensure that Synlait's balance sheet is reset, Synlait is
planning to undertake an equity capital raising. Bright
Dairy has indicated it fully supports Synlait raising equity
capital, subject to terms being finalised, and all necessary
approvals being received, to more substantially re-set the
company's equity and debt position to provide a platform
to return to sustainable growth for Synlait farmer suppliers
and all shareholders. The Synlait Board and its advisers are
continuing to progress the structure, terms and conditions
of a proposed equity raising and will further update
shareholders by the end of August, possibly earlier, by
market announcement.

In connection with the proposed equity raising, Synlait
is also proposing to concurrently refinance its Bank
Facilities. As part of that refinancing Synlait will be
seeking amended facilities that, upon the completion of
the equity raising, will be available to be drawn to meet
Synlait's expected working capital and other corporate
requirements as well as allowing for the repayment of
the Bonds. Further information will be provided about the
refinancing once arrangements have been agreed with
the banks.

Lets dissect this part of your post for a moment.

"As part of that refinancing Synlait will be seeking amended facilities that, upon the completion of the equity raising, will be available to be drawn to meet Synlait's expected working capital and other corporate requirements as well as allowing for the repayment of the Bonds."

Current working capital facilities are $270m
Current bonds are $180m

That's $450m of debt just there. And it excludes "other corporate requirements"

But reflect for a moment on the current situation. The banks are most uncomfortable with having $409m worth of exposure (from half year report $180.836m working capital liability + $230m revolving credit liability - see Note 12).

So what makes you think the banks will agree to increasing htir banking facilities?

Especially after they have just nabbed $130m of cash. Which incidentally still remains a debt repayable in 12 months.

Ergo the cap raise at it very minimum needs to be $130m.

At say a 10% discount on today's SP of $0.25.

That is another 589,000,000 shares to be issued. Bringi total shares to 808,000,000

And say the market loves the deal and now values Synlait at $100m (rather than today's piddly $54m) I end up with a best case scenario of shares that you buy at $0.22 being worth $0.12

[Teitei]

Another respected view from HC thread and Werdplayer.....

What is the best outcome for salvaging some value for Synlait's minor shareholders?

If the loan is approved, they avoid liquidation but will have the value of their holdings more or less wiped anyway by equity raising. By my calculation, any equity raising would probably push the SP sub 10c.

By contrast, if the loan isn't approved and Synlait misses the $130M payment, the company will cease trading and begin an insolvency process.

Sounds bad, but in Bright and A2 Milk you have two parties with a vested interest in the company and its assets. One or both of them will step in, and there's a good chance that would require buying out the minor shareholders at a much higher price then if equity raising were to occur.

When I think it through, I can't see any rational reason why shareholders would want to approve this loan.

So vote against the loan and let SML go into receivership = zero $ for shareholders.

Bright can rightly assert that they have delivered on their commitment but minorities voted against the bailout.

Bright is then free to buy the assets and businesses as cheaply as they can - and they will.

[Left Field]

So vote against the loan and let SML go into receivership = zero $ for shareholders.

Bright can rightly assert that they have delivered on their commitment but minorities voted against the bailout.

Bright is then free to buy the assets and businesses as cheaply as they can - and they will.

The Machiavellian machinations are endless.... and your opinion is just one of many..... and just as likely is wrong.

Whatever our opinions and bias, It's fascinating to watch and I'm looking forward to hearing ATM's stance on the proposed loan. 

[Teitei]

The Machiavellian machinations are endless.... and your opinion is just one of many..... and just as likely is wrong.

Whatever our opinions and bias, It's fascinating to watch and I'm looking forward to hearing ATM's stance on the proposed loan. 

So far, Bright has delivered on their commitment and I believe that they will honour their commitment.

The doomsayers? Heck, Synlait was long gone according to them. Lol.

[Minimoke]

The Machiavellian machinations are endless.... and your opinion is just one of many..... and just as likely is wrong.

Whatever our opinions and bias, It's fascinating to watch and I'm looking forward to hearing ATM's stance on the proposed loan. 

We won't know anything for sure until the fat lady sings

But in the meantime I see shares have crossed at $0.235 valuing the company at $51.3m. Maybe Mr market knows best.

[Minimoke]

So far, Bright has delivered on their commitment and I believe that they will honour their commitment.

The doomsayers? Heck, Synlait was long gone according to them. Lol.

I've been calling Synlait out since I observed the prior disastrous CEO at the AGM. And its been downhill ever since.

[Teitei]

I've been calling Synlait out since I observed the prior disastrous CEO at the AGM. And its been downhill ever since.

And do you see anyone disagreeing with you about Synlait going downhill? 

But that's a different call altogether from the imminent demise of Synlait which the doomsayers have been on and on about.

Like I wrote before, Synlait has been dead several times over according to the doomsayers. LOl.

[Teitei]

We won't know anything for sure until the fat lady sings

But in the meantime I see shares have crossed at $0.235 valuing the company at $51.3m. Maybe Mr market knows best.

Agreed - only a fool would buy any stock cum-CR. Mr market knows best indeed.

[Minimoke]

And do you see anyone disagreeing with you about Synlait going downhill? 

But that's a different call altogether from the imminent demise of Synlait which the doomsayers have been on and on about.

Like I wrote before, Synlait has been dead several times over according to the doomsayers. LOl.

I liken Synlait to a cancer suffer.

The cancer was first identified at that fateful AGM. I now reckon it has now spread and is now stage 4 and terminal.

I have yet to read anything that gives me convinced Synlait is survivable.

They will however leave a legacy - and that will be a text book.

And the estate will be fought over by the relatives.

[Teitei]

Lets dissect this part of your post for a moment.

"As part of that refinancing Synlait will be seeking amended facilities that, upon the completion of the equity raising, will be available to be drawn to meet Synlait's expected working capital and other corporate requirements as well as allowing for the repayment of the Bonds."

Current working capital facilities are $270m
Current bonds are $180m

That's $450m of debt just there. And it excludes "other corporate requirements"

But reflect for a moment on the current situation. The banks are most uncomfortable with having $409m worth of exposure (from half year report $180.836m working capital liability + $230m revolving credit liability - see Note 12).

So what makes you think the banks will agree to increasing htir banking facilities?

Especially after they have just nabbed $130m of cash. Which incidentally still remains a debt repayable in 12 months.

Ergo the cap raise at it very minimum needs to be $130m.

At say a 10% discount on today's SP of $0.25.

That is another 589,000,000 shares to be issued. Bringi total shares to 808,000,000

And say the market loves the deal and now values Synlait at $100m (rather than today's piddly $54m) I end up with a best case scenario of shares that you buy at $0.22 being worth $0.12

Who in their right mind would buy a share which is cum-CR? One would only consider investing during the CR period when details are available to assess the proposition.  Again, just like Sky TV.

[Left Field]

Who in their right mind would buy a share which is cum-CR? One would only consider investing during the CR period when details are available to assess the proposition.  Again, just like Sky TV.

Buying a share  during a CR period is not always possible (eg the recent IFT CR ....) Usually CR's are only available to current holders at a certain date (usually after the CR is announced) ...... ie you need to already be a SML shareholder, and then the CR participation is usually proportionally based on your current (SML)  holding???

For us poor ignorant souls who may not even read the SKY threads or be aware or your great success in that investment, it may be helpful if you outline what your intended strategy is for SML and how you anticipate it will work?

Thanks.

[Minimoke]

Sky, at time of capital raise expected FY20 EBITDA of $155–175m and NPAT of $20–25m

Synlait at last announcement expect EBITDA $45m ($19.9m at half year) and will make a loss (half year = $96.2m) and half year gross profit was down 47%.

I'm not seeing the relevance of a SKY comparison.

[SemiStrongForm]

Another day, another Synlait! This thing has been great entertainment to watch from the side lines.

I don't see how any regular shareholder comes out ahead after a CR. But that's just my ignorance probably.

[Buzz]

Who in their right mind would buy a share which is cum-CR? One would only consider investing during the CR period when details are available to assess the proposition.  Again, just like Sky TV.

The difference imo is:

• SKT were already showing signs that the turnaround was working, SML is showing no signs that they can recover
• SKT Cum-CR definitely crashed the SP, but we knew the terms of the CR, whereas for SML we don't, yet
• We didn't have to be SKT shareholders, or partake in the CR, the market gifted us low SP, whereas the market SP for SML hasn't bottomed yet

[Minimoke]

Another day, another Synlait! This thing has been great entertainment to watch from the side lines.

I don't see how any regular shareholder comes out ahead after a CR. But that's just my ignorance probably.

I was getting very tempted to buy just so I can attend the meeting! Unfortunately I'l be out of the country - but gee it would be interesting to be there.