Minority shareholders voted in favour of a loan to Synlait Milk at a special meeting at Dunsandel. Photo / Michael Craig
Minority shareholders voted in favour of a loan to Synlait Milk at a special meeting at Dunsandel. Photo / Michael Craig
Synlait Milk will live to see another day after winning vital shareholder approval for a last-minute loan today, but the cash-strapped dairy processor still faces several hurdles before it can be in the clear.
At a special meeting in Dunsandel, shareholders voted overwhelmingly in favour of a $130 millionloan from the company’s biggest shareholder, China’s Bright Dairy.
Infant formula marketer a2 Milk, which owns just under 20% of Synlait Milk, had earlier advised that it would vote in favour of the loan from an affiliate of Bright Dairy.
Synlait chair George Adams said most of the proxy votes cast – before a2 Milk said this morning that it would support the loan – were in favour.
Bright, as a related party with 39% of the shares, was not allowed to vote for the proposal under NZX rules.
Adams thanked shareholders for their support today.
“The shareholder loan resolution was very important to Synlait’s future and completed the first step in resetting Synlait’s balance sheet,” he said.
Bright Dairy-appointed Synlait director Julia Zhu also acknowledged today’s shareholder vote.
“There is a stronger, healthier future for the business coming and Bright Dairy is deeply committed to ensuring Synlait’s long-term success for all shareholders and its farmer suppliers,” Zhu said.
Synlait now faces the task of refinancing and raising capital in part to deal with $180m in bonds that fall due in December.
As of today, Synlait’s market capitalisation comes to just $85.2m, and it is faced with having to raise funds in the hundreds of millions.
“The task ahead is a complicated one,” Adams told the Herald after the meeting.
“When you are looking at, by order of magnitude, raising more than your market cap, then that is always challenging.
“It is certainly challenging to have that conversation with retail shareholders, and even the institutions frankly, so we have got to look carefully at coming up with a solution that delivers sufficient capital into the business, and at the same time with a high degree of assurance that we are going to be able to raise it, which obviously means talking to our larger shareholders.”
Synlait expects to have refinanced and have raised capital by September.
“We don’t have long at all, and there is a lot of work going on in the background,” Adams said.
Synlait was facing the prospect of becoming insolvent if today’s vote had failed.
“Without the result, it would have been very difficult for us, so there is more than a glimmer of hope.”
Adams was taken to task by shareholders wanting to know why the company’s performance had nosedived.
Synlait chair George Adams.
For the most part, he said management’s decisions – to built a new plant at Pōkeno and seek new customers – were understandable at the time, given the company wanted to spread its risk outside Canterbury after the 2011 Canterbury earthquakes and its reliance on a2 Milk’s custom.
He said Covid-19 and the collapse of China’s birth rate put a big dent in both Synlait’s and a2 Milk’s businesses.
In terms of his reception at the meeting, Adams said there was clearly a higher degree of emotion from shareholders who had invested in a company that “clearly could have done better”.
The company has seen a slew of changes at a management and directorship level and a string of earnings downgrades over the last 18 months.
Adams, who was appointed as an independent director of Synlait in March, was made chairman after John Penno, the company’s co-founder and board-appointed director, stepped down.
In April, Synlait won an extension for a $130m debt repayment after asset impairments plunged the company into a $96.2m loss for the first halfto January 31.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
