SML - Synlait

[Toddy]

Yes, watching and learning without having to have any exposure.

PGW shareholders and SML shareholders are probably comparing notes.

And in sporting speak.... 'We will take away the learnings and get better'.

[BlackPeter]

...

I am wondering, which articles from Sun Zhu's "The art of war" might be apply? There must be some equivalent to "When two people argue, the third one is happy"?

Actually - Just found some which might help sleepless bondholders:

Sun Zhu said (the art of war, chapter three, first paragraph): "In the practical art of war, the best thing of all is to take the enemy's country whole and intact: to shatter and destroy it is not so good."

He said as well (chapter 11, paragraph 68): At first, then, exhibit the coyness of a maiden, until the enemy gives you an opening; afterwards emulate the rapidity of a running hare, and it will be too late for the enemy to oppose you".

I recon the latter is the phase we are currently in, so - just lets all sit back, watch and enjoy the spectacle ;

Applied to Synlait this might mean ... whatever happens, it will happen fast ... and yes, there is probably a good chance that the company might survive as a going concern (though I'd expect a meaningful tribute (i.e. material contribution) from bond and shareholders).

Of course, only if whoever pulls the threads has read Sun Zhu, but I understand - most educated Chinese have.

[Minimoke]

Actually - Just found some which might help sleepless bondholders:

Sun Zhu said (the art of war, chapter three, first paragraph): "In the practical art of war, the best thing of all is to take the enemy's country whole and intact: to shatter and destroy it is not so good."

He said as well (chapter 11, paragraph 68): At first, then, exhibit the coyness of a maiden, until the enemy gives you an opening; afterwards emulate the rapidity of a running hare, and it will be too late for the enemy to oppose you".

I recon the latter is the phase we are currently in, so - just lets all sit back, watch and enjoy the spectacle ;

Applied to Synlait this might mean ... whatever happens, it will happen fast ... and yes, there is probably a good chance that the company might survive as a going concern (though I'd expect a meaningful tribute (i.e. material contribution) from bond and shareholders).

Of course, only if whoever pulls the threads has read Sun Zhu, but I understand - most educated Chinese have.

I reckon parts of Synlait are going concerns,

Talbot cheese obviously isn't.

Richard Pearce Drive in Mangere blending / canning facility isn't - that's been flogged off already.

Dairy works appears not to be.

But Dunsandel could well be since it can process mega tones of milk and create 140 cans of infant formula a minute. Nice synergy there with Mataura

And Pokeno could be on a lesser scale - the as yet unnamed international customer might be interested in looking after that as a going concern.

[BlackPeter]

I reckon parts of Synlait are going concerns,

Talbot cheese obviously isn't.

Richard Pearce Drive in Mangere blending / canning facility isn't - that's been flogged off already.

Dairy works appears not to be.

But Dunsandel could well be since it can process mega tones of milk and create 140 cans of infant formula a minute. Nice synergy there with Mataura

And Pokeno could be on a lesser scale - the as yet unnamed international customer might be interested in looking after that as a going concern.

Agreed - and, to be honest - for me Synlait always was only Dunsandel. Did any other part make money? Maybe Dairy works is paying their own bills, but otherwise - don't think so. The rest has been bought by an imprudent board driven by hype and the desire to diversify without considering the cost or the quality of doing so. That way they ended up with the worst case from both worlds - they bought a lot of additional plants for risk mitigation (like Pokeno) and product diversification (Talbot) without ever checking the viability of any of them - and worse - after all this diversification they still had only the one cash cow they had before (A2 IF), which sadly fall ill during Covid and subsequently got transported to the meat works by the one customer (ATM) they relied on.

Clearly - Synlait will be viable based on Dunsandel alone - and don't forget that they would bring as bonus not just the Chinese IF import license, but as well the milk supply. Synlait has lots of contractually bound farmers in mid Canterbury and their own transport network. Don't think that they managed to build up anything similar anywhere else.

[Ferg]

I remain interested in opinions and facts that support an argument that SML ISN'T beyond salvation and bondholders can sleep easily at night.

Others have made good contributions to this but I do know bankers (generally) do not like owning businesses.  It's not their strength, desire or core business.  They will do everything in their power to not own a business, unless it is the last resort.

So in addition to providing temporary debt and covenant relief which Buzz suggested (and it does happen, don't ask how I know), there will be a lot of bankers burning a lot of midnight oil to ensure they get back most or all of their money.  But someone somewhere will have to pay.  That someone may well be a combination of everyone - bondholders, debtholders, shareholders, new investors etc.

It is also possible some debt gets converted to PIK notes at a discount and on-sold where interest payments cease and accrue instead to new (PE?) investors.

There will be numerous conversations occurring, with each party trying to extract the best deal for themselves.  Shareholders and bondholders are mere spectators until there is an EGM whereupon they will likely be given Hobson's choice.  Will it survive?  Sure.  In its current form?  Unlikely.

[Minimoke]

Others have made good contributions to this but I do know bankers (generally) do not like owning businesses.  It's not their strength, desire or core business.  They will do everything in their power to not own a business, unless it is the last resort.

So in addition to providing temporary debt and covenant relief which Buzz suggested (and it does happen, don't ask how I know), there will be a lot of bankers burning a lot of midnight oil to ensure they get back most or all of their money.  But someone somewhere will have to pay.  That someone may well be a combination of everyone - bondholders, debtholders, shareholders, new investors etc.

It is also possible some debt gets converted to PIK notes at a discount and on-sold where interest payments cease and accrue instead to new (PE?) investors.

There will be numerous conversations occurring, with each party trying to extract the best deal for themselves.  Shareholders and bondholders are mere spectators until there is an EGM whereupon they will likely be given Hobson's choice.  Will it survive?  Sure.  In its current form?  Unlikely.

In a post somewhere below I've pointed out that I think the bankers are in a very good position. By splitting the current assets into bite size chunks it shouldn't be had to find a couple of hundred million$ to pay back the bank debt. At its very simplest $70m for dairy works, $70m for Dunsandel and $70m for Pokeno. A2 could have Dunsandel. Bright could have Pokeno. Someone else could have dairy works.

I wouldn't be in the least bit worried if I was a banker. There may be a bit of work bringing in any other top level secured creditors so they don't muddy the waters

What will be taking some effort is how some temporary relief is worded and structured so as not to trigger the bond default (the $35m debt repayment trigger now that $130m has to be paid back)

[Minimoke]

Well, I have to say I am a bit confused by today's announcement.

Sure I get the "lead with Pride" thing.

But it seems to me that Synlait (the company with no money) is now going to dabble further in farm effluent management systems, emissions-friendly feed options, advanced soil testing, alternative fertilisers, and tree planting.

So is Nestlé the "big new international Customer" that we still haven't officially heard about?

And its a bit scant on detail - just how much cash is Synlait throwing into the pot?

And how much product are they going to produce for Nestle? What does "potential" mean?

And when they say "anticipated investment" does this mean they are just thinking about investing (on the presumption they will still be around) or is it an actual done deal - and if so why the word "anticipated"

(and why does the last government "breaking news" con come to mind - you remember the one. Where all news outlets were stopping the presses for an urgent govt announcement. And it ended up with the government lawyers, Hipkins and Blackrock announcing an environment fund with no money in it)

I know, call me skeptical. But isn't this just a big diversion from the more pressing issues at hand. Like selling Dairy works. Finding $35m to stop a bond default, finding $130m to keep the bankers happy. Even perhaps turning the ship around from a loss maker to something profitable.

[Basil]

Marked as not price sensitive which says it all.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/427901/414770.pdf
Just more B Corp nonsense, rearranging the deck chairs on the Titanic thinking it will make a difference lol
Really...you couldn't make this garbage up if you tried lol

[Hectorplains]

Marked as not price sensitive which says it all.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/427901/414770.pdf
Just more B Corp nonsense, rearranging the deck chairs on the Titanic thinking it will make a difference lol
Really...you couldn't make this garbage up if you tried lol

New Synlait & Nestlé co-investment partnership to reduce on-farm emissions
Synlait Milk Limited (Synlait) has joined Nestlé in a unique three-way partnership with its farmer
suppliers to help fund innovative on-farm emissions reduction tools.
The partnership is focused on pragmatic on-farm solutions that improve efficiency, such as effluent
management systems...

Hmmm, I reckon a bit of similar focus in the Board room would go a L-O-N-G way with these guys.  An "effluent management system" sounds like just to the go for them.

[Breezy]

Marked as not price sensitive which says it all.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/427901/414770.pdf
Just more B Corp nonsense, rearranging the deck chairs on the Titanic thinking it will make a difference lol
Really...you couldn't make this garbage up if you tried lol

These guys are that woke they make Greta look right wing.

[Basil]

Hmmm, I reckon a bit of similar focus in the Board room would go a L-O-N-G way with these guys.  An "effluent management system" sounds like just to the go for them.

[/quote]

ROFL, classic.  I am sure shareholders will take tremendous comfort from the fact that this groundbreaking new partnership has been the focus point of board and senior management's attention in recent weeks and months...I mean there's nothing else of greater importance going on is there, lol

[Minimoke]

ROFL, classic.  I am sure shareholders will take tremendous comfort from the fact that this groundbreaking new partnership has been the focus point of board and senior management's attention in recent weeks and months...I mean there's nothing else of greater importance going on is there, lol

Helps explain the delay (to the very last moment) of the half year results announcement. Effluent management has been front of mind.

[Breezy]

Have a look at the lovely pink colored sp chart since listing on their website, thats the most impressive mountain range on earth, pathetic company.

[Minimoke]

We can do that
You cannot view this attachment.

[BlackPeter]

New Synlait & Nestlé co-investment partnership to reduce on-farm emissions
Synlait Milk Limited (Synlait) has joined Nestlé in a unique three-way partnership with its farmer
suppliers to help fund innovative on-farm emissions reduction tools.
The partnership is focused on pragmatic on-farm solutions that improve efficiency, such as effluent
management systems...

Hmmm, I reckon a bit of similar focus in the Board room would go a L-O-N-G way with these guys.  An "effluent management system" sounds like just to the go for them.

Hmm - while I understand all the outpour of cynicism (not just yours) - and while I contributed myself in beating up this company ... I guess there is just one thing I am asking myself:

Why would Nestle go all the length to shape an effluent partnership agreement with a quickly deteriorating milk producer sitting on a rock in the South Pacific taking just its last breaths before it is being squashed between the interests of an inept management and selfish shareholders with a hidden agenda (which would be contrary to the agenda of Nestle)?

Just wondering - maybe, just maybe Nestle might be the white knight - and maybe it is not just the Chinese waiting to seize an opportune moment in the self destruction battle between SML and A2M.

Wouldn't it be interesting if Nestle buys into SML on the cheap - and adds it to its empire?

While a secure milk supply would be good for China, it clearly would be as well desirable for the largest food and beverage company in the world.

Who knows, maybe the board had a bright moment after all and did put their priorities right ... but we shall see.