SML - Synlait

[Teitei]

As an observation, my take is that a CR has already been decided on and advisors appointed - matter of time now as to when it is announced.

Craigs would not be publishing a report about a CR if they are still in the running to do the CR. Looks to me that they have missed out on the mandate.

That's just how the investment banking/stockbroking industry operates.

[Minimoke]

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? 

They will retain their % share of the company. But a company that becomes worth less and less as time goes on.

As I recall they originally bought in at $2.20 a share. Then increased there shareholding to at $3.275.in 2016. Then in 2018 paid $10.90 a share. In 2020 they participated in the cap raise at $4.95.

A2 now hold 19.9%. 

Synlait keep raising money which allows the executive team to continue working on their ESG vanity projects while failing to control debt or return a even semi meaningful profit.

So at what point do A2M stop throwing good moment after bad.

[Minimoke]

As an observation, my take is that a CR has already been decided on and advisors appointed - matter of time now as to when it is announced.

Craigs would not be publishing a report about a CR if they are still in the running to do the CR. Looks to me that they have missed out on the mandate.

That's just how the investment banking/stockbroking industry operates.

Could be Forsyth Barr clipping the ticket again quite nicely

Have to remember if its for $200m, the are still $110m short for debt repayments in 2024. So does this suggest a deal for Dairyworks for around $110 is near finalised?

[Teitei]

Could be Forsyth Barr clipping the ticket again quite nicely

Have to remember if its for $200m, the are still $110m short for debt repayments in 2024. So does this suggest a deal for Dairyworks for around $110 is near finalised?

I know of very few companies which operate without debt.

[Minimoke]

I know of very few companies which operate without debt.

Debt isn't a problem. In fact I'd go so far as saying its a good thing if you really want to work your balance sheet.

But its not a good thing when your total market cap is $206m and your 2024 debt due is $310m

And its not good when you last report your cash and receivable's sit at $92.1 but your Payables are at $281m

And its not good when you put aside $177m for assets to sell. And you can't sell those assets at that value. And you may only get $110m for them when and if they do sell.

And that's excluding total loans and borrowing of $423m.

[Minimoke]

Support at $0.89 seems to have dried up

[Shareguy]

Have started to get interested in this stock and have been following developments. Craig's report today is grim reading indeed. The title sums it up "Who'll be left carrying the can"

Not a lot of volume but down 7 percent today so far.

Hope it survives on the NZX

[Basil]

$180m of unsecured subordinated bonds due for repayment in December.  Good luck to bondholders with that

[Minimoke]

$180m of unsecured subordinated bonds due for repayment in December.  Good luck to bondholders with that

I don't know what this talk of a $200m cap raise expects to achieve.

These bonds were issued for the purpose of getting debt under control. Since then the debt situation has worsened . Now to the tune of over $420m.

Clearly the cap raise talk is simply to appease the bankers. Once that debt is cleared there is no way Synlait can manufacture and create a profit enough to clear the rest of the debt.

So what option is there. Go into liquidation with as many assets as possible to make it look like a reasonable going concern. With the aim of looking after the remaining secured debtors. Liquidation will look after major shareholders. Minor shareholders will be toast. And bond holders the crumbs on that toast.

If I was the major shareholders Id be saying to the secured debtors, "look heres $240m. We clear your debt as long as we have a process that allows us to takes over all assets but leave us clear of any debt. We like the shiny stainless and the shiny new SAP. But not much else. What do you guys think?"

[Basil]

I think the problems and sickness with extreme woke culture, combined with the very weak heavily indebted balance sheet, is such a dire situation you'd have to have rocks in your head to buy the shares or bonds.  Anyone considering the bonds should take expert professional advice to ensure they truly understand that these are unsecured and subordinated and rank behind all bank debt. Extremely high risk, be warned!

[Minimoke]

Synlait today announce a further increase in costs. Base milk $7.50/kgMS from $7.25/kgMS for 2023/24 season

[snapiti]

SML the sort of company that you are almost guaranteed to have your face ripped off if purchasing shares.
They really do have their balls in the ever tightening vice......tick tok
A ship which has been heading in the wrong direction and is now about to crash head on into a wall of due debt.
One would not want to be an unsecured bond holder

[Teitei]

I have the unsecured subordinated bonds and am perfectly relaxed.

There's $800m (soon to be $1 billion?) of shareholders' funds ahead of the bonds before bondholders lose money.

And ATM will lose all of its China IF business if SML goes belly up.  ATM shareholders should be very very worried?

[Teitei]

Synlait today announce a further increase in costs. Base milk $7.50/kgMS from $7.25/kgMS for 2023/24 season

So why is it a positive for Fonterra but a negative for SML?

[Teitei]

Debt isn't a problem. In fact I'd go so far as saying its a good thing if you really want to work your balance sheet.

But its not a good thing when your total market cap is $206m and your 2024 debt due is $310m

And its not good when you last report your cash and receivable's sit at $92.1 but your Payables are at $281m

And its not good when you put aside $177m for assets to sell. And you can't sell those assets at that value. And you may only get $110m for them when and if they do sell.

And that's excluding total loans and borrowing of $423m.

And you left out inventories of $250m for some reason. Are inventories not working capital?