SML - Synlait

[Minimoke]

Now lets look at the banking covenants. These cover $410m of net bank debt.

In spite of the $130m loan from Bright by 15 July, Synlait say they will still be in breach of covenants at 31 July.

Banks will be owed $280m. With no assets sales in view they have no chance of getting this money back form with asset sales or revenue.

Given Synlait say they will be in breach at 31 July then the Bond Holder supervisor has the right to call on the immediate repayment of the bonds.

Add into this two key pieces of the announcement are missing. Firstly, what is Bright securing the $130m against? Secondly what interest rate are  they charging. Without knowing this information the banks and shareholders aren't in any sort of position to approve the loan and clear the covenants.

Looks to me like a takeover bid by Bright.

[Minimoke]

Last financial year was terrible for Synlait. They had an adjusted EBITDA of $95.6m

Now they are saying for 2024 it will be between $45 - $60m and likely at the lower end of the range. ("excluding a non-cash adjustment for the product costing method change of approximately $17 million. " .  So, full year EBITDA of $61.2m down $34.4m

On Friday SP was $0.44 and a market cap of $96.18m. I expect SP to tank even further today.

[snapiti]

I know some won't want to understand this however Brights move to take over the $130m bank debt is to strenghen it's position long term over the company.
Still, IMO, in Brights best interest to get the SP as low as possible before the cap raise.
Really the transfer of $130m of bank debt to Brights is akin to switching from the sharks to the devil.

[snapiti]

Be interesting to see the terms of the new loan to Brights.

[Minimoke]

I know some won't want to understand this however Brights move to take over the $130m bank debt is to strenghen it's position long term over the company.
Still, IMO, in Brights best interest to get the SP as low as possible before the cap raise.
Really the transfer of $130m of bank debt to Brights is akin to switching from the sharks to the devil.

Which begs the question. What doe s Bright actually want.

For the $130m they could have bought out completely profitable Dairyworks.

Given the Contracts waiver last week we can assume A2 have over 50 of Synlait business. So A2 + plus Dairyworks have to be, say in the region of 75% of synlaits business. Why would bright  be prepared to stump up $130m for such a relatively small slice of the Synlait pie.

(I see market is absorbing the news. Opening at $0.42 now at $0.40. Which values the whole company at $87.4m)

[snapiti]

it's all about control of the situation, As stated in some of my prior posts Bright can not let SML go into receivership as they lose all or any control so logical for them to take over a loan with security.
Of more concern for those invested is Bright have got another board set (I assume this was negotiated with the loan), I make that 4 directors now which is out of portion to their holdings.
Not being privy to the companies constitution so I don't know how voting works in the board room but I think they only need one friendly in the board room and they now have control, they might even have it already depending on who can vote in the board room.
I have said it a few times now, those holding are at the mercy of the next trading halt and whatever comes from that

[Minimoke]

it's all about control of the situation, As stated in some of my prior posts Bright can not let SML go into receivership as they lose all or any control so logical for them to take over a loan with security.
Of more concern for those invested is Bright have got another board set (I assume this was negotiated with the loan), I make that 4 directors now which is out of portion to their holdings.
Not being privy to the companies constitution so I don't know how voting works in the board room but I think they only need one friendly in the board room and they now have control, they might even have it already depending on who can vote in the board room.
I have said it a few times now, those holding are at the mercy of the next trading halt and whatever comes from that

Ruth was a Bright appointees. So they are just swapping out one for another. But they are certainly bringing in a new guard.

Bright have 4 out of 8 Board positions.

[Minimoke]

Before the day gets away on us lets see how it plays out.

You cannot view this attachment.

[snapiti]

Ruth was a Bright appointees. So they are just swapping out one for another. But they are certainly bringing in a new guard.

Bright have 4 out of 8 Board positions.

what makes you think Ruth was a Brights appointee, not that it matters, fact remains they only need one friendly on the board and they have control.

[snapiti]

Market can see what is going on.
I feel sorry for the ave jo punter, they will not doubt see Brights taking over the debt as a positive

[Minimoke]

@snapiti. This! (note who isnt there any more)
You cannot view this attachment.

[snapiti]

righto.... so that would indicate Bright already have control, unless the constitution says the chairs vote can be used as casting vote if the vote is even.
I wonder if Mr Penno left because of the board control issues.
Either way Brights have gained a lot more control of the company by taking on banks Debt the terms of which would be interesting reading

[Basil]

Bonds now at 99%. Not with a 40 foot barge pole is still how I see them

[Minimoke]

righto.... so that would indicate Bright already have control, unless the constitution says the chairs vote can be used as casting vote if the vote is even.
I wonder if Mr Penno left because of the board control issues.
Either way Brights have gained a lot more control of the company by taking on banks Debt the terms of which would be interesting reading

Im fascinated on what security they plan on holding.

Banks have first dibs on $410m of debt. Lets take off the $130, this still leaves $280m the banks can claim first.

Obviously Dairy works isn't worth the $130m Synlait reckon its worth. Lets call it $100m

That leaves $180m the banks have dibs on.

I reckon its fair to say that Pokeno is pretty much worthless as a trading concern. It appears to be a substantial loss maker and plant is grossly under utliised. Note how in the latest update no mention is made of this as an asset sale / balance sheet correction tool. So I reckon Synlait have figured out they aren't going to be able to sell it.

That leaves Dunsandel. Its profitable. But farmers are threatened to leave if they dont get paid. In the half year update there was $280m of accounts payable. I presume much of this is un/semi secured milk supply

So, presently Bright arent prepared to stump up with $130m + $280m to clear bank debt.

No mention made of how farmers are going to get paid. But these folk are ahead of bond holders. And that's another $180m duer at end of year - where is this going to come from and against what security?

[snapiti]

basil as I see it if the bonds are not repaid the company goes into receivership, now with bright dairies having secured debt over the company they are in a much better position if receivership comes along right, or well they lose some control