Synlait Milk secures debt refinancing, US$168.2M equity raise

NEW ZEALAND – Synlait Milk, a New Zealand-based dairy company, has made significant strides in its recovery efforts with a successful debt refinancing agreement.

The recently finalized refinancing deal with creditors was a critical step outlined in the settlement terms with The A2 Milk Co. 

This settlement, achieved in August, resolved a prolonged contractual and pricing dispute between the two companies. 

In conjunction with the debt refinancing, Synlait has announced a proposed equity raise of US$168.2 million. A2 Milk has committed to participating in this equity raise, becoming Synlait’s second-largest shareholder. 

The equity raise is a prerequisite for the debt refinancing, and Synlait’s shareholders are set to vote on this proposal at a special meeting on September 18. 

Should the equity raise be approved, the arrangement with A2 Milk will become unconditional, further solidifying Synlait’s financial foundation.

Completion of the equity raise and the debt refinancing are anticipated to conclude by October 1. Synlait, headquartered in Wellington and listed on both the New Zealand and Australian stock exchanges, is navigating these changes as part of its broader business recovery plan.

 “The new bank refinancing is another positive step forward in Synlait’s business recovery plan and actions to deleverage our company,” CEO Grant Watson stated. 

He also emphasized the importance of providing certainty to shareholders, customers, suppliers, and staff ahead of the shareholders’ meeting.

China’s Bright Dairy, already a major player in Synlait’s shareholder structure, will increase its stake from 39% to 65.3% through the equity raise. 

This move will position Bright Dairy as Synlait’s largest shareholder, surpassing A2 Milk. Bright Dairy has also provided Synlait with a NZ$130 million bailout loan to support the company’s survival and ongoing operations.

The new debt facilities, which replace existing bank loans, are part of a broader financing package that includes contributions from ANZ, Bank of China, Bank of Communications, China Construction Bank, HSBC, Industrial and Commercial Bank of China, Kiwibank, and Rabobank. 

The total amount of the syndicate loans is NZ$450 million, comprising a NZ$160 million working capital facility, a NZ$205 million revolving credit facility, and a NZ$75 million term loan.

Additionally, there is a NZ$10 million on-demand bilateral facility within the working capital arrangement.

Beyond these new banking arrangements, Synlait also has NZ$180 million in five-year unsecured subordinated bonds outstanding. 

These bonds are subject to early redemption rights triggered by the proposed equity raise. The proceeds from the equity raise and certain tranches of the new facilities will be used to repay the outstanding bank debt and the bonds, further enhancing Synlait’s financial stability.

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