SML - Synlait

[Administrator]

Happy new year all, I have taken the axe to this thread to clear out some off-topic unpleasantness. Quite of bit of it was back and forth between people calling each other out. Please just use the report button INSTEAD in the future.

Kind of seemed like some borderline trolling occurred here which isn't very cool. Keep in mind we all invest and research for the purpose of making money, no one cares if you're right or wrong if there isn't money involved.
 

[KW]

So is the $130M debt due in March additional to the $150M in bonds that expire in December 2024?  Who owns the debt and bonds? 

[winner (n)]

So is the $130M debt due in March additional to the $150M in bonds that expire in December 2024?  Who owns the debt and bonds?

Yep separate issues

Banks expect $130m in March and the 'retail' bonds need to be paid in December

That's what they said in recent preso.

17 bond holders hold 1,000,000 or more and about 78% of the total.

[Basil]

Banks are making noises they want AT LEAST $130M repaid in March and there's in fact $180m of those bonds that mature in December.  That's at least $310m due for repayment this year.  On top of that from memory, the banks are gradually reducing the level of their other lending facilities.

Make no mistake, they are forced sellers of Dairyworks and are reported to have up to 4 potential purchasers and have had for many months now but have not accepted or negotiated an acceptable price with any one of them?  Why not?  Surely you have to wonder who is calling the shots here and what their real motives are?    Interesting to note there are currently no bids to buy those bonds on the market at any price. (SML010) and also note those bonds are subordinated to all bank debt.  Chances of default look very high to me.  Even a 50% face value yield for an 11 month debt obligation, (about 75 cents on the dollar per bond) wouldn't interest me in the slightest. 100% yield would amount to about 50 cents on the dollar and would probably more correctly reflect the binary nature of what could play out here, but even then, maybe red or back on the roulette wheel is a less risky bet with better odds of success?

Bright Dairy could easily run this into the ground and pick up the assets from the receivers and leave the unsecured subordinated bondholders to hang out to dry.

[Buzz]

Bright Dairy could easily run this into the ground and pick up the assets from the receivers and leave the unsecured subordinated bondholders to hang out to dry.

Agree they could run it into the ground, but not so easily pick up the assets. By the time it got that desperate, there will be competition for the assets and the receivers will take the highest bidder. Maybe not in Bright's interests (or ATM) to let it get that vulnerable to other interests and find themselves in a bidding war, for something they collectively already own more than half of. Also, there's no evidence yet that Bright and/or ATM are not one of potential buyers of the assets for sale.

[Minimoke]

Banks are making noises they want AT LEAST $130M repaid in March and there's in fact $180m of those bonds that mature in December.  That's at least $310m due for repayment this year.  On top of that from memory, the banks are gradually reducing the level of their other lending facilities.

Make no mistake, they are forced sellers of Dairyworks and are reported to have up to 4 potential purchasers and have had for many months now but have not accepted or negotiated an acceptable price with any one of them?  Why not?  Surely you have to wonder who is calling the shots here and what their real motives are?    Interesting to note there are currently no bids to buy those bonds on the market at any price. (SML010) and also note those bonds are subordinated to all bank debt.  Chances of default look very high to me.  Even a 50% face value yield for an 11 month debt obligation, (about 75 cents on the dollar per bond) wouldn't interest me in the slightest. 100% yield would amount to about 50 cents on the dollar and would probably more correctly reflect the binary nature of what could play out here, but even then, maybe red or back on the roulette wheel is a less risky bet with better odds of success?

Bright Dairy could easily run this into the ground and pick up the assets from the receivers and leave the unsecured subordinated bondholders to hang out to dry.

I would be EXTREMELY worried if I was a bond holder.

SML quite clearly cannot raise $150m to keep the banks happy. Lets say by some miracle they do manage to flog off Dairy works and keep they banks happy. That's essentially all of the family jewels sold. Including the glass rubies, Pewterware and Tobby Jug. There will be nothing left other than Dunsandael and bits of pokeno (they have already sold / leased back parts of Auckland already.

Given they essentially don't make a profit so won't have any extra cash to put into the bond repayments I am at a total loss to figure out how bond holders will get paid.

Surely they can't issue more bonds to pay existing bonds - isn't that equivalent to a ponzi?

Oh well. Bond Holders should sleep a virtuous sleep knowing their money went down the gurgler to a B Corp.

[Basil]

By the time it got that desperate, there will be competition for the assets and the receivers will take the highest bidder.

Sure, if it comes to that the receivers are legally obligated to get the best price they can but there's been plenty of receiverships over the years where plant and equipment goes for a small fraction of book value.  Maybe if it comes to that, this time will be different, who knows but remember that the receivers fees must all be paid, then preferential creditors, and then all loans to all banks fully repaid before subordinated bondholders have any chance of seeing some potential payback.

Surely they can't issue more bonds to pay existing bonds - isn't that equivalent to a ponzi?

Potentially they could but that presupposes there's sufficient appetite from new investors or existing bondholders to roll over their investment for a further term.  I would think any new bond issue would have a very different interest rate than the current one, perhaps 6-7% higher so that's potentially another ~ $11m in annual interest costs going forward if they can be rolled over, potentially with Bright Dairy underwriting the new bond offer.

I would be EXTREMELY worried if I was a bond holder.

I couldn't agree more.

Oh well. Bond Holders should sleep a virtuous sleep knowing their money went down the gurgler to a B Corp.

LOL - Classic !
 
 

[winner (n)]

Things must be bad when Forbar slash their target for Synlait ........ target price from $1.40 a share to $1.10.

[Sideshow Bob]

Here the the one you've all been waiting for. Really!!

Synlait's Sustainability Report. 

https://www.nzx.com/announcements/424497

It even has some pink!!

Nothing about financial sustainability but.........

[Minimoke]

And here is a nice wee graph to show what has happened to Synlait SP since it announced in June 2018 it was going down this "sustainability" path

[Ferg]

Here the the one you've all been waiting for. Really!!

Synlait's Sustainability Report. 

https://www.nzx.com/announcements/424497

It even has some pink!!

Nothing about financial sustainability but.........

That really speaks volumes.  In light of everything else going on, this was the priority?  Unbelievable.

"And the band played on"

[Minimoke]

Market not moved by customer (A2M) getting onto USA Amazon. New low of $0.90 today - will we see SP with an "8" in front of it by end of day.

[Teitei]

Highly dilutive equity raise on the way according to Craigs.

So :

Current market cap of $196m with sp at 90c (218.6m shares on issue).

Say $200m to be raised so it will have to be a 3 for 1 rights issue at 30c?

Bright Foods & ATM to jointly underwrite the CR?


https://businessdesk.co.nz/article/primary-sector/synlait-faces-the-choice-of-the-lesser-evil-in-dealing-with-debt-issues
paywalled

[Minimoke]

Highly dilutive equity raise on the way according to Craigs.

So :

Current market cap of $196m with sp at 90c (218.6m shares on issue).

Say $200m to be raised so it will have to be a 3 for 1 rights issue at 30c?

Bright Foods & ATM to jointly underwrite the CR?


https://businessdesk.co.nz/article/primary-sector/synlait-faces-the-choice-of-the-lesser-evil-in-dealing-with-debt-issues
paywalled

Bright and A@M need to be running the numbers. They have seen their initial investments significantly diluted over time.

Say they have $200m (we know A2M has), are they better off supporting a capital raise and see their investment diluted even more.

Or do they just put this mutt down and for their $200m buy the assets off the receivers.

[Teitei]

Bright and A@M need to be running the numbers. They have seen their initial investments significantly diluted over time.

Say they have $200m (we know A2M has), are they better off supporting a capital raise and see their investment diluted even more.

Or do they just put this mutt down and for their $200m buy the assets off the receivers.

Why would their investment be diluted further with a CR? As long as they= participate (and underwrite), they would at worse maintain their stakes and if there are big shortfalls, could very well increase their stake at 'cheap' prices.

Makes sense to put Synlait into receivership and try to pick up the assets cheap. That assumes though that there are no other buyers around for the assets or ATM does not outbid Bright Foods for the assets.

In any case, Synlait in receivership could mean the loss of the SAMR registration & ATM can kiss its exports to China for a while?