SML - Synlait

[Teitei]

With respect, I think you are debating semantics here mate.  It's quite clear they are seeking a deferment of just 1 trading day.  I really don't think any bond supervisor is going to take prescriptive action over that or face any liability especially as its in a trading halt to give effect to that deferment.   If Bright Dairy doesn't come through with a rescue package next Tuesday...the "proverbial" is likely to hit the fan shortly afterwards.

Get a large fresh batch of popcorn in over Easter for consumption on Tuesday morning 😊

The chess pieces are in place for Bright Dairy to make its move and I do not see ATM & other shareholders as having much option but to accept whatever is proposed by Bright Dairy.

2nd April - one day after April Fools' Day - when all will have to be revealed. Who will be the fools?

As one of my ex-bosses (high flyer with a law degree from Harvard) used to advise, keep an eye on the big picture before going through the fine details.

Here's where I see the big picture for SML :

1.  ATM needs SML to stay in business until 2027 (3 more years at least) or else, ATM itself will be out of business.

"Without Synlait, which holds the licence for manufacture of Chinese-labelled "a2 Platinum", a2Milk is in big trouble. It would mean a2Milk would need to obtain an equivalent licence for its majority-owned Mataura Milk in Southland. Obtaining that licence could be a long process, and there is also a long herd-conversion process before Mataura will have the necessary volume of A2 milk."

2. Synlait is part of the long term global food chain supply strategy of Shanghai Maling via Bright Foods in NZ - the other being Silver Fern Farm ($311m).

3. There are 8 directors in Synlait (including ex Finance Minister, Ruth Richardson), consisting of 5 NZ directors and 3 Bright Foods appointees. They will be very mindful of the implications of Synlait being able to meet its ongoing debt servicing and debt repayment/refinance obligations. Otherwise, like Jenny Shipley found with Mainzeal, they become personally liable.

https://www.nzherald.co.nz/business/mainzeal-claims-hit-159m-dame-jenny-shipley-settles-66m-payment/6KJ3J36BC5CUZBML5NPVYYVGLY/
paywalled

"The big court case result out last August ruled the Mainzeal directors were liable for $39.8m plus interest and costs but it also sparked more creditor claims. Shipley, Peter Gomm and Clive Tilby had settled payments of $6.6m each, the report said.

"The Supreme Court ordered the directors to contribute to the assets of the companies $39.8m together with interest at the prescribed rates for the period from 28 February 2013 to the date of the judgment. With interest, the judgment sum exceeds $60m," McKay and Bethell's report said.

4. Last observation goes to Keith Woodford :

https://www.farmersweekly.co.nz/opinion/where-does-synlaits-future-lie/

"The cleanest outcome would be if a2Milk were to make an outright bid to purchase Synlait. Bright could then decide to sell or retain its shares.

If Bright decided to retain the shares, then a2milk would need to buy at least 76% of other shareholdings to obtain control. Perhaps a2Milk is biding its time, as the screws are tightened on Synlait. And then, what would Bright decide to do? Perhaps a counter offer to ratchet up the price?

The only thing close to a certainty is that something big now has to happen. The Synlait of the future is going to be very different to the current Synlait."

[Basil]

I wonder what A2 think about that. They have a blocking stake.

Putting out the fire with Gasoline ?  https://www.youtube.com/watch?v=dAagFKdsSNs

[Minimoke]

With respect, I think you are debating semantics here mate.  It's quite clear they are seeking a deferment of just 1 trading day.  I really don't think any bond supervisor is going to take prescriptive action over that or face any liability especially as its in a trading halt to give effect to that deferment.  If Bright Dairy doesn't come through with a rescue package next Tuesday...the "proverbial" is likely to hit the fan shortly afterwards.

Get a large fresh batch of popcorn in over Easter for consumption on Tuesday morning 😊

I'm not suggesting the Bond Supervisor act today. But he will be burying the midnight oil and checking out his exposure to this situation

Clearly a deal hasn't been done by today. So things are not straightforward

I'd expect any deal to require approval by shareholders. Bright is not a majority holder

I can't see A2 allowing their holding to be diluted or extinguished. Or allow their supply to be put at risk

A2 and SML are in a fractious, litigious relationship

[Basil]

Agreed mate, all good points you've just made. 

[Teitei]

I'm not suggesting the Bond Supervisor act today. But he will be burying the midnight oil and checking out his exposure to this situation

Clearly a deal hasn't been done by today. So things are not straightforward

I'd expect any deal to require approval by shareholders. Bright is not a majority holder

I can't see A2 allowing their holding to be diluted or extinguished. Or allow their supply to be put at risk

A2 and SML are in a fractious, litigious relationship

But not Bright Foods and ATM.

So put yourself in the shoes of the two of them and think of how you would play the game to maximise your position.

My pick is a convertible note issue to Bright Foods and this will be supported by ATM.

A carve up of SML in 2027 to follow.

[Minimoke]

But not Bright Foods and ATM.

So put yourself in the shoes of the two of them and think of how you would play the game to maximise your position.

My pick is a convertible note issue to Bright Foods and this will be supported by ATM.

A carve up of SML in 2027 to follow.

Convertible notes. Or liquidation

I have given my thoughts on that in earlier posts below.

Some outcome that sees A2 gets Dunsandel (with bright if they are both so inclined)

Bright can have Pokeno for that security of food supply

Flog dairy works for a song.

Every scenario I have does not include bond holders.

[Teitei]

I have given my thoughts on that in earlier posts below.

Some outcome that sees A2 gets Dunsandel (with bright if they are both so inclined)

Bright can have Pokeno for that security of food supply

Flog dairy works for a song.

Every scenario I have does not include bond holders.

Huge assumption by you that minorities in NZ have zero remedy and remember this - they lose everything before bond holders lose a cent.

And the independent directors?  Mainzeal beckons.

[Minimoke]

Huge assumption by you that minorities in NZ have zero remedy and remember this - they lose everything before bond holders lose a cent.

And the independent directors?  Mainzeal beckons.

Yes, minority shareholders could be facing a loss of everything. But they have had ample opportunity to exit their position. So if that is the outcome I have zero sympathy for them. (I exited my position ages ago)

If I was Bright / A2 I'd be looking at a deal that best suited our two combined interest. And that would be a takeover of stainless steel assets in exchange for clearing bank debt. Everyone else plays the remaining cards as they fall.

[Teitei]

Yes, minority shareholders could be facing a loss of everything. But they have had ample opportunity to exit their position. So if that is the outcome I have zero sympathy for them. (I exited my position ages ago)

If I was Bright / A2 I'd be looking at a deal that best suited our two combined interest. And that would be a takeover of stainless steel assets in exchange for clearing bank debt. Everyone else plays the remaining cards as they fall.

Have you seen who are the minority shareholders? 

[Minimoke]

Have you seen who are the minority shareholders? 

Do you mean the likes of John Penno (2.34%)  and ACC (2.68%. Holders who have had ample opportunity to quit their positions.

Between them Bright and A2 own something like 58 - 59%. These are the only two with a greater than 5% holding that enables them to call a Special Meeting

Next largest holding is HSBC clients with 3.4%

These small holders can block the required 75% of vote for a special resolution.

Which indicates Bright / A2 need to lobby 15.8% of small shareholders

I'm pleased my name isn't on the list

[Teitei]

Do you mean the likes of John Penno (2.34%)  and ACC (2.68%. Holders who have had ample opportunity to quit their positions.

Between them Bright and A2 own something like 58 - 59%. These are the only two with a greater than 5% holding that enables them to call a Special Meeting

Next largest holding is HSBC clients with 3.4%

These small holders can block the required 75% of vote for a special resolution.

Which indicates Bright / A2 need to lobby 15.8% of small shareholders

I'm pleased my name isn't on the list

A huge assumption on your part that they want to get out.

[Minimoke]

I don't like to make wild assumptions.

But I do reflect on this. And when it will crater

You cannot view this attachment.

[Teitei]

I don't like to make wild assumptions.

But I do reflect on this. And when it will crater

You cannot view this attachment.

So when will it crater?

[Buzz]

If you are a bond holder, you would be extremely distressed - that's for sure!

I thought you said that you had some bonds and were unconcerned?

[Minimoke]

So when will it crater?

Could be as early as Tuesday. Or In december when Bonds need to be repaid. I don't see life after that.