SML - Synlait

[Ferg]

They are not trying to repay all debts. They are trying to reduce it to the level where they will be able to refinance it. Also do not forget $24m settlement payment from A2M and $130m loan from Bright.

My bad - I forgot about the $130m loan from Bright so thanks for that.

I read something today that says the new bank debt facilities will be $450m plus the $130m.  If so, it will be interesting to see how much of the bank facilities have been drawn and the terms of the facilities.

[CG]

My bad - I forgot about the $130m loan from Bright so thanks for that.

I read something today that says the new bank debt facilities will be $450m plus the $130m.  If so, it will be interesting to see how much of the bank facilities have been drawn and the terms of the facilities.

$450m is proposed new bank facilities and terms are still under negotiation. Related information can be found in the Notice of shareholders meeting (page 22-23 to be precise) https://www.synlait.com/wp-content/uploads/2024/08/Notice-of-Meeting_Digital.pdf

[Minimoke]

Total debt was
$180m Bonds
$309 Banks
$589.7 total

Total debt in December will be
$130 Bright
$179 Banks
$309m total.

Thats a $280m improvement. And $130m of that Bright isn't worried about.,

Well I'm confused. I thought this hullaboo was about resetting the balance sheet. But it appears debt is now going to look like
$130m Bright
$450m banks
$580m TOTAL

So $9.7m better off

[Teitei]

Well I'm confused. I thought this hullaboo was about resetting the balance sheet. But it appears debt is now going to look like
$130m Bright
$450m banks
$580m TOTAL

So $9.7m better off

Simple.

Drawn vs undrawn debt facilities.

Banks make available debt facilities which can be drawn down subject to the company continuously meeting agreed covenants, terms and conditions.

[Teitei]

Bye bye Pokeno? 

Looks like one option is to monthball Pokeno - $300m+ down the gurgle?

Be interesting to work the figures out with Pokeno written off.

https://www.nzx.com/announcements/436600

https://businessdesk.co.nz/article/primary-sector/open-country-expected-to-pick-up-synlaits-north-island-milk-supply

[Minimoke]

Bye bye Pokeno? 

Looks like one option is to monthball Pokeno - $300m+ down the gurgle?

Be interesting to work the figures out with Pokeno written off.

https://www.nzx.com/announcements/436600

https://businessdesk.co.nz/article/primary-sector/open-country-expected-to-pick-up-synlaits-north-island-milk-supply

A2 noted that Synlait sourced theri milk from canterbury and Waikato farms. Rather than mothball, perhaps A2 and Bright can buy processing and canning for a song. A2 needs canning facilities.

[Left Field]

A2 noted that Synlait sourced theri milk from canterbury and Waikato farms. Rather than mothball, perhaps A2 and Bright can buy processing and canning for a song. A2 needs canning facilities.

I've heard several rumours re ATM buying Pokeno..... at this stage just rumours..... but another reason why ATM is better to be 'well positioned' with its cash pile (and yes, I appreciate you favour an ATM dividend payout.)

If it is to happen... I suspect any announcement will wait till after SML's cap raise is approved...... the following from SML today....

22/08/2024, 08:30 NZST, GENERAL
Synlait Milk Limited (Synlait) notes the article published by BusinessDesk this morning regarding the possible sale of raw milk in the North Island to Open Country.
 
 In April, Synlait announced it was undertaking a strategic review of its North Island assets, including its manufacturing facility in Pokeno and its blending and canning facility in Auckland. The strategic review was expected to take several months. It is now nearing the final stages. The strategic review does include consideration of the continued collection and processing of milk in the North Island. Synlait expects to make a further announcement about the outcome of the broader strategic review before it releases its full-year results at the end of September.

[Teitei]

I've heard several rumours re ATM buying Pokeno..... at this stage just rumours..... but another reason why ATM is better to be 'well positioned' with its cash pile (and yes, I appreciate you favour an ATM dividend payout.)

If it is to happen... I suspect any announcement will wait till after SML's cap raise is approved...... the following from SML today....

22/08/2024, 08:30 NZST, GENERAL
Synlait Milk Limited (Synlait) notes the article published by BusinessDesk this morning regarding the possible sale of raw milk in the North Island to Open Country.
 
 In April, Synlait announced it was undertaking a strategic review of its North Island assets, including its manufacturing facility in Pokeno and its blending and canning facility in Auckland. The strategic review was expected to take several months. It is now nearing the final stages. The strategic review does include consideration of the continued collection and processing of milk in the North Island. Synlait expects to make a further announcement about the outcome of the broader strategic review before it releases its full-year results at the end of September.

SML responding so quickly to the BusinessDesk's article is telling imo.

The BusinessDesk article is rather specific about Open Country signing a deal to take over SML's milk supply. So I would certainly give it credence - especially when Pokeno has been out of operation for a while already.

Open Country Dairy is expanding its Waikato facilities at a time when Milk production in the region is static.

https://www.ruralnewsgroup.co.nz/dairy-news/dairy-general-news/open-country-unveils-major-expansion-plan

[Minimoke]

SML responding so quickly to the BusinessDesk's article is telling imo.

The BusinessDesk article is rather specific about Open Country signing a deal to take over SML's milk supply. So I would certainly give it credence - especially when Pokeno has been out of operation for a while already.

Open Country Dairy is expanding its Waikato facilities at a time when Milk production in the region is static.

https://www.ruralnewsgroup.co.nz/dairy-news/dairy-general-news/open-country-unveils-major-expansion-plan

I didn't realize Pokeno was out of operation. I thought it was just under utilized

[Basil]

Well I'm confused. I thought this hullaboo was about resetting the balance sheet. But it appears debt is now going to look like
$130m Bright
$450m banks
$580m TOTAL

So $9.7m better off

No matter how you slice and dice it, Synlait is still going to be a VERY heavily indebted company, struggling at an operational level to make a profit and controlled by the CCP.  Gosh that's such an incredibly attractive investment opportunity, why did I sell lol

[Teitei]

No matter how you slice and dice it, Synlait is still going to be a VERY heavily indebted company, struggling at an operational level to make a profit and controlled by the CCP.  Gosh that's such an incredibly attractive investment opportunity, why did I sell lol

I personally think Synlait will prosper (just like Westland) after Bright takes control.

But I do not believe minorities will get to enjoy the upside. Like any multinational entities, plenty of scope for transfer pricing to channel the profits to wherever the owners feel are most appropriate!

Look at RBD!

[Minimoke]

No matter how you slice and dice it, Synlait is still going to be a VERY heavily indebted company, struggling at an operational level to make a profit and controlled by the CCP.  Gosh that's such an incredibly attractive investment opportunity, why did I sell lol

Synlait last reported net assets of $699m

How do they write off $350m worth of mothballed Pokeno?

They are already going to have to write down Dairyworks. (I dont think that was done in half year results)

It look ugly. Especially if they have the potential of $580 bank / bright debt (which excludes creditors)

[Buzz]

Synlait last reported net assets of $699m

How do they write off $350m worth of mothballed Pokeno?

They are already going to have to write down Dairyworks. (I dont think that was done in half year results)

It look ugly. Especially if they have the potential of $580 bank / bright debt (which excludes creditors)

Apparently 'mothballing Pokeno' is off the table now: https://www.synlait.com/wp-content/uploads/2024/08/SML-Independent-Advisers-Report-20-August-2024-FINAL.pdf

[Teitei]

Apparently 'mothballing Pokeno' is off the table now: https://www.synlait.com/wp-content/uploads/2024/08/SML-Independent-Advisers-Report-20-August-2024-FINAL.pdf

Begs the question then as to what they are going to do with the plant if they sell the milk supply to Open Country Dairy.

[Minimoke]

Apparently 'mothballing Pokeno' is off the table now: https://www.synlait.com/wp-content/uploads/2024/08/SML-Independent-Advisers-Report-20-August-2024-FINAL.pdf

The reports supports my view A2M and Bright should l have driven this thing to insolvency and picked up the pieces.

"we have estimated a hypothetical insolvency value range of $0.15 - $0.50 per share (approximately 33% – 60% of our going concern value). This outcome relies on a liquidator or receiver being able to generate strong buyer interest for Synlait's assets and completing the process over a reasonable time period. If these conditions are not satisfied, we believe that our assessed range could significantly overstate the potential insolvency value of Synlait"

That is a value range between $32,787,249 and $109,290,831

But I need to move on. Dunsandle is obviously being saved. For $217.8m.

But that leaves distressed Pokeno.

Lets assume its not going to be mothballed.

It seems teh very max it could be worth is $109m

Which is supported by "However, the material improvement in debt levels, along with the bank refinancing which is a condition of the a2MC Placement and a2MC Settlement, will provide the company with the necessary headroom to
explore further avenues for debt reduction and earnings improvement"

". Notwithstanding that view, we believe these divestments (Pokeno and dairyworks) are likely to remain viable options to further reduce debt following the Equity Raising"