SML - Synlait Milk Ltd

[mondograss]

Pretty sure Graham Hart also owns Hubbards cereals. Seems like synergy to me!

[winner69]

Hart might be thinking ‘done that before, all too hard’

But one never knows what he’s thinking

[Balance]

Hi Balance, I am genuinely interested in what you are saying, any chance you could share your thoughts on where this is all going? Appreciated��

Suggest you read this opinion piece again, bearing in mind that there are two shareholders in SML with deep pockets who are in a position to achieve their long term strategic aim by taking control of SML.

ATM is going nowhere - it needs SML to export to China until 2027. Without that, ATM is in big trouble.

Bright Dairy is not going to miss an opportunity to strengthen its food/dairy supply line.

John Penno gone is a positive development which seems to have escaped the market. Penno would not have left Synlait the way he did without some assurance of what happens next with the company? He has 5m+ shares worth a cool $60m at one time!

https://www.interest.co.nz/rural-news/126460/keith-woodford-says-synlait-big-trouble-losses-mounting-and-no-easy-answers

"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 percent 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."

[Balance]

With his deep pockets he could afford to buy the lot, knock them into shape wait a couple of years , float, take his seed money out and still be left with 40% inside 3 or 4 years.

He could as Hart actually provides strategic direction. His inner circle executes the strategy and boy, have they not done superbly well!

The assumption though that the whole of SML is for sale is imo flawed.

[Bikeguy]

Suggest you read this opinion piece again, bearing in mind that there are two shareholders in SML with deep pockets who are in a position to achieve their long term strategic aim by taking control of SML.

ATM is going nowhere - it needs SML to export to China until 2027. Without that, ATM is in big trouble.

Bright Dairy is not going to miss an opportunity to strengthen its food/dairy supply line.

John Penno gone is a positive development which seems to have escaped the market. Penno would leave Synlait the way he did without some assurance of what happens next with the company? He has 5m+ shares worth a cool $60m at one time!

https://www.interest.co.nz/rural-news/126460/keith-woodford-says-synlait-big-trouble-losses-mounting-and-no-easy-answers

"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 percent 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."

Very much appreciated Balance,
When you say “ The assumption though that the whole of SML is for sale is imo flawed” can you elaborate on this more? I am a holder working out what, if anything this is I can do here, lol

[Bikeguy]

I hold the opinion that Bright, and as a captive customer A2, have made the most of the circumstances they have found themselves in, in that Bright wish to fully secure Synlait.

My thoughts are that they will look to secure it through a credit raise, simply making it so unattractive that no one wishes to participate? A2 will have to.

I do hold the thought that Bright/A2 may look to make a joint takeover offer (would need to to circumvent OIO), the split to be whatever they hash out....but I feel the CR would deliver the same thing for them cheaper?

[Balance]

I hold the opinion that Bright, and as a captive customer A2, have made the most of the circumstances they have found themselves in, in that Bright wish to fully secure Synlait.

My thoughts are that they will look to secure it through a credit raise, simply making it so unattractive that no one wishes to participate? A2 will have to.

I do hold the thought that Bright/A2 may look to make a joint takeover offer (would need to to circumvent OIO), the split to be whatever they hash out....but I feel the CR would deliver the same thing for them cheaper?

OIO is not an issue imo.

Look at Westland and Silver Fern - NZ desperately needs foreign investors with capital, expertise and access to global markets.

Agree with you that CR is how the game will play out.

And haven't the market done a wonderful job delivering a trashed SP as well as panic-stricken bond holders?

[Bikeguy]

OIO is not an issue imo.

Look at Westland and Silver Fern - NZ desperately needs foreign investors with capital, expertise and access to global markets.

Agree with you that CR is how the game will play out.

And haven't the market done a wonderful job delivering a trashed SP as well as panic-stricken bond holders?

Yes, you are right it’s been absolute panic…

I have been needing to drop my entry point but have held off simply because of what I feel is almost certain (CR) and what a show that will be, Bright will underwrite it because that’s actually what it wants…it to fail miserably and to pick these up for what, maybe as low as 0.25 a share??

[billkiapi]

I agree- a CR now seems most likely, with retail investors being massively diluted. The prospect of asset sales seems very remote, and it won't cover the 560M debt anyway

[Rawz]

Yes, you are right it’s been absolute panic…

I have been needing to drop my entry point but have held off simply because of what I feel is almost certain (CR) and what a show that will be, Bright will underwrite it because that’s actually what it wants…it to fail miserably and to pick these up for what, maybe as low as 0.25 a share??

You dont need to drop your entry point. Your cash now should go to where the best value is right now. Forget averaging down. Your old money invested cannot be saved. Your new money now ready to be invested can go anywhere. Its free to the best home you can find.

[Bikeguy]

You dont need to drop your entry point. Your cash now should go to where the best value is right now. Forget averaging down. Your old money invested cannot be saved. Your new money now ready to be invested can go anywhere. It’s free to the best home you can find.

It’s a valid point you are making,

[Marilyn Munroe]

OIO is not an issue imo.

Look at Westland and Silver Fern - NZ desperately needs foreign investors with capital, expertise and access to global markets.

Agree with you that CR is how the game will play out.

And haven't the market done a wonderful job delivering a trashed SP as well as panic-stricken bond holders?

I agree with Balance, tho OIO won't be an issue if the alternative is workers being sent down the road. Besides if the OIO digs in it will receive informal guidance from the Rice Christian and Landed Gentry factions of the National Party.

I am less sure that Bright will be the Wong Fei-hung riding to the rescue of the oppressed shareholders of Sysnlait. You may have heard that there is a bit of a pinch economically in China at the moment. The pinch is being felt most sharply by municipalities like Shanghai which is the ultimate owner of Bright Dairy.

While a deeply discounted capital raise is attractive it would require a lot of Kiwi Pesos. The Bright Dairy apparatchik who wanders down the corridor to the Shanghai Bean Counter Commissar must be worried a request for precious foreign currency will earn him a transfer to ideology and party discipline duties in Xinjiang.

Boop boop de do
Marilyn

[Bikeguy]

I agree with Balance, tho OIO won't be an issue if the alternative is workers being sent down the road. Besides if the OIO digs in it will receive informal guidance from the Rice Christian and Landed Gentry factions of the National Party.

I am less sure that Bright will be the Wong Fei-hung riding to the rescue of the oppressed shareholders of Sysnlait. You may have heard that there is a bit of a pinch economically in China at the moment. The pinch is being felt most sharply by municipalities like Shanghai which is the ultimate owner of Bright Dairy.

While a deeply discounted capital raise is attractive it would require a lot of Kiwi Pesos. The Bright Dairy apparatchik who wanders down the corridor to the Shanghai Bean Counter Commissar must be worried a request for precious foreign currency will earn him a transfer to ideology and party discipline duties in Xinjiang.

Boop boop de do
Marilyn

Appreciate your thoughts on SML Marilyn, can I ask you your opinion on what you think the outcome will be? Cheers

[blackcap]

It’s a valid point you are making,

One of the most valid points made. Many in the investing world however do not heed/think along these lines. In business its the same...

[Marilyn Munroe]

Appreciate your thoughts on SML Marilyn, can I ask you your opinion on what you think the outcome will be? Cheers

Who knows. I get the impression the situation is being allowed to drift

You question gives me an opportunity to rant about the poor level of governance in the agricultural processing sector;

Waitaki NZ Refigeration

Fortex

AFFCO

PPCS(1), now Silver Fern Farms

Fonyerra

Westland Dairy

and now Synlait.

PGG Wrightson is another tale of woe in an agricultural related category

Are there any I have missed?

Boop boop de do
Marilyn

(1) How Keith Cooper escaped unscathed from the Richmond litigation debacle is a mystery to me.

[whatsup]

Who knows. I get the impression the situation is being allowed to drift

You question gives me an opportunity to rant about the poor level of governance in the agricultural processing sector;

Waitaki NZ Refigeration

Fortex

AFFCO

PPCS(1), now Silver Fern Farms

Fonyerra

Westland Dairy

and now Synlait.

PGG Wrightson is another tale of woe in an agricultural related category

Are there any I have missed?

Boop boop de do
Marilyn

(1) How Keith Cooper escaped unscathed from the Richmond litigation debacle is a mystery to me.

Dont forgetr the Norgate debarcal Williams & Kettles, something to do with the Cushings family.

[kiora]

Dont forgetr the Norgate debarcal Williams & Kettles, something to do with the Cushings family.

Norgate & Kiwi Coop
"Powdergate suspects in court
Seven dairy company employees stood before a court recently in a case dubbed New Zealand’s ‘Powdergate’. Described as a ‘power struggle involving a bully boy vendetta’ the case concerns a multi-million dollar conspiracy to illegally export milk powder disguised as animal feed.

New Zealand’s Serious Fraud Office (SFO) heard how former Kiwi boss Craig Norgate allowed Paul Marra and Malcolm McCowan to draft their own terms of reference for an inquiry into the illegal exporting of milk powder.

Fonterra’s regional managing director and former New Zealand Dairy Board executive Grant Waterhouse, was called as a witness to give evidence in the case,"

https://www.dairyindustries.com/news/1802/powdergate-suspects-in-court/

& Norgate then

https://management.co.nz/archive/dairy-king-craig-norgate

Go figure ?

[Balance]

Who knows. I get the impression the situation is being allowed to drift



The banks will not be allowing the situation to drift so there's plenty happening behind the scenes.

John Penno leaving/quitting with immediate effect is an example of what's happening behind the scene.

All comes down to what the two big shareholders want to do - the possibility does exist that they allow SML to go under and have a big bun fight over who can buy the assets they want cheaper.

Problem for them with that scenario is that they then lose control of the process and another player could end up with control of the assets.

[Bikeguy]

The banks will not be allowing the situation to drift so there's plenty happening behind the scenes.

John Penno leaving/quitting with immediate effect is an example of what's happening behind the scene.

All comes down to what the two big shareholders want to do - the possibility does exist that they allow SML to go under and have a big bun fight over who can buy the assets they want cheaper.

Problem for them with that scenario is that they then lose control of the process and another player could end up with control of the assets.

Between them they own 59% Bright 39. A2 20
Does Bright just want 51% of SML?CR would be the cheapest way to get that?
Or do they want it all, either with or without A2…
I’m picking they will go with the CR because at 51% or more they have it anyway…

[Balance]

Between them they own 59% Bright 39. A2 20
Does Bright just want 51% of SML?CR would be the cheapest way to get that?
Or do they want it all, either with or without A2…
I’m picking they will go with the CR because at 51% or more they have it anyway…

SML needs at least $200m imo to stabilise its financial position so a CR is almost inevitable (next option being a takeover which is problematic with the differing objectives of the 2 big shareholders).

So a 4 for 1 share issue (underwritten by Bright & ATM) at 25c could be what's on the card. Remember Sky TV's 2.83 for 1 rights issue at 12c?

[whatsup]

SML needs at least $200m imo to stabilise its financial position so a CR is almost inevitable (next option being a takeover which is problematic with the differing objectives of the 2 big shareholders).

So a 4 for 1 share issue (underwritten by Bright & ATM) at 25c could be what's on the card. Remember Sky TV's 2.83 for 1 rights issue at 12c?

WOW thats a biggee but even " IF " the C R is a success, where and what is SML's future outside A2M if Prof Woodwards latest writeup of A2 cow penetration has legs ?

[Newman]

The banks will not be allowing the situation to drift so there's plenty happening behind the scenes.

John Penno leaving/quitting with immediate effect is an example of what's happening behind the scene.

All comes down to what the two big shareholders want to do - the possibility does exist that they allow SML to go under and have a big bun fight over who can buy the assets they want cheaper.

Problem for them with that scenario is that they then lose control of the process and another player could end up with control of the assets.

Bright Dairy would not let Synlait go under because doing so would produce unaffordable consequences (e.g., life imprisonment and loss of personal assets) for its current and previous bosses. It is unlikely Bright Dairy wants to get 100% of Synlait, either. Two top executives of ChemChina were sent to jail recently because of their stupid decision to buy Syngenta Group.

If a capital raising goes ahead, keeping its shareholding percentage would be a likely outcome for Bright Dairy, I think.

For bondholders, a capital raising would be good news.

[Bikeguy]

SML needs at least $200m imo to stabilise its financial position so a CR is almost inevitable (next option being a takeover which is problematic with the differing objectives of the 2 big shareholders).

So a 4 for 1 share issue (underwritten by Bright & ATM) at 25c could be what's on the card. Remember Sky TV's 2.83 for 1 rights issue at 12c?

We are all just guessing here of course but I agree/feel that the above is the most likely outcome of the current situation…Bright would likely pick up the 12% it wants (possibly )cheap as chips..

[Balance]

We are all just guessing here of course but I agree/feel that the above is the most likely outcome of the current situation…Bright would likely pick up the 12% it wants (possibly )cheap as chips..

Could be 5 for 1 at 20c to raise $200m and potentially, create a huge shortfall situation for Bright to achieve over 51% shareholding.

The deal will need shareholders' approval of course but given the precarious position SML is in, that is a forgone conclusion imo.

And yes, it's a guess but based upon the information available, an educated guess?

Receivership is still a possibility but that's a guess too! :eek2:

[Bikeguy]

Bright Dairy would not let Synlait go under because doing so would produce unaffordable consequences (e.g., life imprisonment and loss of personal assets) for its current and previous bosses. It is unlikely Bright Dairy wants to get 100% of Synlait, either. Two top executives of ChemChina were sent to jail recently because of their stupid decision to buy Syngenta Group.

If a capital raising goes ahead, keeping its shareholding percentage would be a likely outcome for Bright Dairy, I think.

For bondholders, a capital raising would be good news.

Makes sense,
A2 have indicated they don’t want to go down the route of a CR in previous statement ( how much of this is gamesmanship is anyone’s guess) but regardless they are going to be forced to play or lose their blocking stake…

The more I kick it around the more I feel a CR is the likeliest of the potential options.

[Bikeguy]

Could be 5 for 1 at 20c to raise $200m and potentially, create a huge shortfall situation for Bright to achieve over 51% shareholding.

The deal will need shareholders' approval of course but given the precarious position SML is in, that is a forgone conclusion imo.

And yes, it's a guess but based upon the information available, an educated guess?

Receivership is still a possibility but that's a guess too! :eek2:

Yes, based upon the information available I feel it’s a guess with merit,

I like these forums because the posts often have some debate and i can learn alot from them.

[Balance]

Makes sense,
A2 have indicated they don’t want to go down the route of a CR in previous statement ( how much of this is gamesmanship is anyone’s guess) but regardless they are going to be forced to play or lose their blocking stake…

The more I kick it around the more I feel a CR is the likeliest of the potential options.

Exactly - Bright would be very happy for A2M to NOT participate in a CR!

A2M is not in the driving seat here unless the arbitration over the exclusive manufacturing agreement is a resounding win for them.

Even then, A2M needs SML to produce for them to be able to sell their IF in China until 2027.

Plenty happening behind the scenes.

[Poet]

Could be 5 for 1 at 20c to raise $200m and potentially, create a huge shortfall situation for Bright to achieve over 51% shareholding.

The deal will need shareholders' approval of course but given the precarious position SML is in, that is a forgone conclusion imo.

And yes, it's a guess but based upon the information available, an educated guess?

Receivership is still a possibility but that's a guess too! :eek2:

Maybe someone can enlighten me here...
Won't bright (or ATM) need 80% shareholder approval to move beyond their current holdings (39% and 20% respectively)? And doesn't that mean that without such approval, neither of them will be able to take up more than their pro-rata entitlement in a cap raise (and in practice, they will have to take up less than their pro-rata entitlement given that not all smaller shareholders will participate)

[Bikeguy]

Maybe someone can enlighten me here...
Won't bright (or ATM) need 80% shareholder approval to move beyond their current holdings (39% and 20% respectively)? And doesn't that mean that without such approval, neither of them will be able to take up more than their pro-rata entitlement in a cap raise (and in practice, they will have to take up less than their pro-rata entitlement given that not all smaller shareholders will participate)

My understanding is neither would need shareholder approval to increase their holdings in SML.
Both would need each other’s agreement for either of them to takeover SML, either through a straight takeover offer, or a scheme of arrangement, the threshold for the latter being 75%

[Poet]

My understanding is neither would need shareholder approval to increase their holdings in SML.
Both would need each other’s agreement for either of them to takeover SML, either through a straight takeover offer, or a scheme of arrangement, the threshold for the latter being 75%

So aren't they subject to the takeover code where they can't go beyond 20% without special measures (or 39% in the case of Bright, who presumably already has approval to be at 39%)

[blackcap]

So aren't they subject to the takeover code where they can't go beyond 20% without special measures (or 39% in the case of Bright, who presumably already has approval to be at 39%)

I think they will have to seek shareholder approval. I recall various other entities with large shareholders having to do the same thing. Definitely ATM as they are currently under 20%, not sure on Bright.

Or can they get a waiver?

[Poet]

I think they will have to seek shareholder approval. I recall various other entities with large shareholders having to do the same thing. Definitely ATM as they are currently under 20%, not sure on Bright.

Or can they get a waiver?

Thanks, that's good to hear. I don't think a waiver is a possibility. This is a matter of statute, not NZX listing rules.

I don't think those large shareholders, who have presided over this huge destruction of wealth, now get to benefit from the destruction by buying up the carcass cheaply.

[Balance]

So aren't they subject to the takeover code where they can't go beyond 20% without special measures (or 39% in the case of Bright, who presumably already has approval to be at 39%)

My understanding is that Bright needs shareholders approval.

From Minter Ellison :

All listed companies are subjected to the Takeover Code so they cannot increase their stake beyond 20% (or from anywhere between 20.1% to 49.9%) except under the following conditions:

a takeover offer (under the Takeovers Code);
a scheme of arrangement (under the Companies Act); or
an acquisition or allotment of shares approved by shareholders.

There are other exceptions to the 20% rule, including ‘creeping’ acquisitions of no more than 5% of the Code Company’s voting rights in a 12 month period in certain circumstances, and compulsory acquisition of the remaining shares in the Code Company, where the shareholder already has 90% or more of the voting rights in that Code Company.

[Poet]

My understanding is that Bright needs shareholders approval.

From Minter Ellison :

All listed companies are subjected to the Takeover Code so they cannot increase their stake beyond 20% (or from anywhere between 20.1% to 49.9%) except under the following conditions:

a takeover offer (under the Takeovers Code);
a scheme of arrangement (under the Companies Act); or
an acquisition or allotment of shares approved by shareholders.

There are other exceptions to the 20% rule, including ‘creeping’ acquisitions of no more than 5% of the Code Company’s voting rights in a 12 month period in certain circumstances, and compulsory acquisition of the remaining shares in the Code Company, where the shareholder already has 90% or more of the voting rights in that Code Company.

Thanks. that was my understanding too. So they can't just lob a 4 for 1 at 0.25 out there because that would result in them being diluted. They are going to have to, either put the company into receivership or come to some arrangement with each other, and the smaller shareholders.

[Ggcc]

My understanding is neither would need shareholder approval to increase their holdings in SML.
Both would need each other’s agreement for either of them to takeover SML, either through a straight takeover offer, or a scheme of arrangement, the threshold for the latter being 75%
It will be a scheme of arrangement between A2 and Bright Dairy to buy out remainder of shareholders at a premium and a capital top up by the two giants. They need to act quickly as I have heard some farmers are leaving Synlait, as they (farmers) need to get paid or they are out of business. No one likes uncertainty

[Balance]

Thanks. that was my understanding too. So they can't just lob a 4 for 1 at 0.25 out there because that would result in them being diluted. They are going to have to, either put the company into receivership or come to some arrangement with each other, and the smaller shareholders.

Thing is, what are minority shareholders going to do if the banks require a capital injection of $200m and Bright is the only entity prepared to underwrite the CR?

Minorities can hardly vote the proposal down and risk SML going into receivership, at which point Bright can assert that they did their best and in all clear conscience, can bid for the company's assets directly (on the cheap).

Minorities have the option to participate in any CR as long as its pro-rata.

[Balance]

It will be a scheme of arrangement between A2 and Bright Dairy to buy out remainder of shareholders at a premium and a capital top up by the two giants. They need to act quickly as I have heard some farmers are leaving Synlait, as they (farmers) need to get paid or they are out of business. No one likes uncertainty

The farmers are under contracts with a take or pay arrangement for their milk with SML, just like the farmers with Fonterra or Westland?

SML/Bright/ATM do need to move sooner than later.

[Bikeguy]

Thanks. that was my understanding too. So they can't just lob a 4 for 1 at 0.25 out there because that would result in them being diluted. They are going to have to, either put the company into receivership or come to some arrangement with each other, and the smaller shareholders.

This is good stuff, I have learned something new here, much appreciated!!

[Bikeguy]

Thing is, what are minority shareholders going to do if the banks require a capital injection of $200m and Bright is the only entity prepared to underwrite the CR?

Minorities can hardly vote the proposal down and risk SML going into receivership, at which point Bright can assert that they did their best and in all clear conscience, can bid for the company's assets directly (on the cheap).

Minorities have the option to participate in any CR as long as its pro-rata.

So what you are saying is Bright could get agreement to (potentially) increasing their position through a CR because if minority shareholders (including A2) don’t agree to it then in reality it’s game over?

[Balance]

So what you are saying is Bright could get agreement to (potentially) increasing their position through a CR because if minority shareholders (including A2) don’t agree to it then in reality it’s game over?

That’s the scenario. Minorities could of course participate in the CR in which case the status quo stays (ie. Bright stays at 39%].

Reality though is that between 5% to 10% of shareholders do not normally participate in any CR. More so when the stock has lost them so much money.

Hard to believe that SML was trading at over $10+ at one time!!!!

HGH is a case in point in recent times - I think 15% of minority retail shareholders did not participate so the underwriters ended up with 15m shares.

[Bikeguy]

That’s the scenario. Minorities could of course participate in the CR in which case the status quo stays (ie. Bright stays at 39%].

Reality though is that between 5% to 10% of shareholders do not normally participate in any CR. More so when the stock has lost them so much money.

Hard to believe that SML was trading at over $10+ at one time!!!!

HGH is a case in point in recent times - I think 15% of minority retail shareholders did not participate so the underwriters ended up with 15m shares.

Thanks Balance,
This is going to be a doozy, what a scenario…Bright can pretty much take their ball and go home in a way if others ( minority shareholders) don’t play ball…like you say they propose a CR, underwritten by themselves, no one agrees, receivers called in…who would touch the asset (Dunsandal) when everyone knows the SAMR license that allows the product to be sold in China is issued by Bright ( my own belief)
My belief is Bright hold all the big cards in this.
We will all know in a few short months, best of luck to all us holders.

[mike2020]

Thanks Balance,
This is going to be a doozy, what a scenario…Bright can pretty much take their ball and go home in a way if others ( minority shareholders) don’t play ball…like you say they propose a CR, underwritten by themselves, no one agrees, receivers called in…who would touch the asset (Dunsandal) when everyone knows the SAMR license that allows the product to be sold in China is issued by Bright ( my own belief)
My belief is Bright hold all the big cards in this.
We will all know in a few short months, best of luck to all us holders.

Sidebar. Fonterra shareholders were gutted (in more ways than one) when Westland went to the Chinese. They were underwater everywhere at the time and largely because of China investments. Wouldn't it be great to get all those suppliers back in the national team?

[billkiapi]

https://www.farmersjournal.ie/viewpoints/viewpoints/chinese-farmers-dump-milk-amid-financial-losses-815699 puts a different perspective on things

[Balance]

Sidebar. Fonterra shareholders were gutted (in more ways than one) when Westland went to the Chinese. They were underwater everywhere at the time and largely because of China investments. Wouldn't it be great to get all those suppliers back in the national team?

Heavens forbid!

The dairy industry in NZ desperately needs competition to ensure that Fonterra does not behave like it did in the past - arrogant, backward and vision less.

Long may competition thrive.

[Bikeguy]

https://www.farmersjournal.ie/viewpoints/viewpoints/chinese-farmers-dump-milk-amid-financial-losses-815699 puts a different perspective on things

Wow! I did not realise this… holy sh.t…

[RTM]

Wow! I did not realise this… holy sh.t…

Good summary Bikeguy ! I felt the same.

[Balance]

Dairy prices continue to trend upwards in latest auction :

https://www.globaldairytrade.info/en/product-results/whole-milk-powder/

[Bikeguy]

Good summary Bikeguy ! I felt the same.

My assumptions have all been based on the feeling Bright would not let SML go…have to say now I might have made a mistake.

[Newman]

Synlait is required to pay $130m back to banks by July 15. If Ryman and SkyTV are used as references, an accelerated capital raising would take 4 weeks to complete. Thus, an announcement on capital raising or extension of bank loans or asset sales could be expected by mid-June. On June 17, Synlait needs to pay interest on its bonds.

[whatsup]

Synlait is required to pay $130m back to banks by July 15. If Ryman and SkyTV are used as references, an accelerated capital raising would take 4 weeks to complete. Thus, an announcement on capital raising or extension of bank loans or asset sales could be expected by mid-June. On June 17, Synlait needs to pay interest on its bonds.

Rock & hard place ! ( stating the bleeding obvious ) !@!

[Newman]

ATM vs. Synlait: their share prices steadily move in opposite directions, but they rely on each other for business. Is there anything unknown to shareholders happening?

[Sideshow Bob]

Fonterra came out at $8/Kg. Looks competitive....if you get paid.

https://www.nzx.com/announcements/432106

2023/2024 season forecast update

Synlait has maintained its forecast base milk price for the 2023/2024 season at $7.80 per kgMS.

2024/2025 season opening forecast

Synlait’s opening forecast for the 2024/2025 season is $8.00 per kgMS. Synlait has taken a conservative approach to its forecasts given the exposure to future global dairy commodity prices, which are volatile in nature, at the beginning of the season.

Synlait farmer suppliers have received, on average, $0.28 per kgMS incentives above the base milk price for the last two seasons. The company is forecasting to pay similar incentives for the 2023/2024 and 2024/2025 seasons.

Forecasts are based on the best information available to Synlait at the time. Synlait will continue to monitor movements and keep farmer suppliers updated as required. Synlait’s final milk price for the 2023/2024 season will be confirmed when the company’s full year result is released in September. The 2024/2025 season forecast will also be updated at the same time.

[mike2020]

$8 was great back in 2008. Even in 2014 it was good. 2025?

[Newman]

Synlait share price keeps falling until a trading halt is placed for the announcement of CR, asset sale, bank exemption, or receivership.

[Bikeguy]

Synlait share price keeps falling until a trading halt is placed for the announcement of CR, asset sale, bank exemption, or receivership.

Have to agree with you

[Nigel]

At what point does this company get taken over?

[Bikeguy]

At what point does this company get taken over?

The financials will force something soon surely, what that is is anybody’s guess😅

[silverblizzard888]

With the $130m extension coming to an end on 15th July, we should see something announced this month how they plan to repay it unless they plan to negotiate another extension which would be a terrible sign of the company's inability to be decisive and act. I think a capital raise will be undertaken for $130m as thats the immediately concern, unless they can sell Dairyworks, then there will be a capital raise to supplement the rest. While that happens they will be making a decision on the north island assets, which I have a feeling Bright will play some part in the outcome. They have enough assets and a decent business to get out of this mess, but the bigger question is at what cost to the businesses current value.

[bull....]

Market update :scared: not looking good

https://announcements.asx.com.au/asxpdf/20240603/pdf/064602vfzl9x3c.pdf


In breach of convenants , farmers issing cessation notices in droves , no sales of dairyworks etc etc

[Sideshow Bob]

Market update :scared: not looking good

https://announcements.asx.com.au/asxpdf/20240603/pdf/064602vfzl9x3c.pdf


In breach of convenants , farmers issing cessation notices in droves , no sales of dairyworks etc etc

The omni-cluster slow motion train wreck just continues.......

[Rawz]

The omni-cluster slow motion train wreck just continues.......

It’s honestly painful to watch…

[Newman]

Market update :scared: not looking good

https://announcements.asx.com.au/asxpdf/20240603/pdf/064602vfzl9x3c.pdf


In breach of convenants , farmers issing cessation notices in droves , no sales of dairyworks etc etc

It is not bad for bondholders. Suspending the sale of Dairyworks is wiser than a fire sale.

[SailorRob]

Guys don't worry. Balance has stated he is getting all his money back guaranteed.

Just like OCA capital raise was guaranteed.

[ValueNZ]

Guys don't worry. Balance has stated he is getting all his money back guaranteed.

Just like OCA capital raise was guaranteed.
Geez, I hope Balance wasn't relying on that cash to service the mortgage on his bach.

[SailorRob]

Geez, I hope Balance wasn't relying on that cash to service the mortgage on his bach.

Do you mean the 'tropical holiday home'

[Bikeguy]

It doesn’t really say much that wasn’t already known?
What I find interesting is Bright is happy to sink in another 130 mil…?

[Bikeguy]

Why would Bright do this ?

[Bikeguy]

Can the loan be exchanged for shares at a later date if SML cannot meet the terms of the loan?

[billkiapi]

Currently Bright has underwritten the extension of the $130M as I understand it. If Synlait goes under, which is seeming more and more likely without a bailout, the banks would have called on Bright as best dressed. I would expect that the $130M as a loan will provide Bright with security and if there's a future default, some kind of first ranking (otherwise why do the banks need to approve). What a fine mess Synlait find themselves in. Next time don't try and screw A2M over!

[Bikeguy]

Currently Bright has underwritten the extension of the $130M as I understand it. If Synlait goes under, which is seeming more and more likely without a bailout, the banks would have called on Bright as best dressed. I would expect that the $130M as a loan will provide Bright with security and if there's a future default, some kind of first ranking (otherwise why do the banks need to approve). What a fine mess Synlait find themselves in. Next time don't try and screw A2M over!

I may be wrong but isn’t Bright outright making a 130 mil loan to SML ?

[Bikeguy]

And SML intends to use that loan to pay its lenders? That how I am reading it?

[Bikeguy]

Isn’t the fact that Bright is loaning SML 130 mil an indication of their intent? ie that they are not walking away?
And not selling Dairyworks at any cost seems pretty reasonable if you have a backer (Bright) that is willing to make loans to support SML…no fire sale needed?

[SailorRob]

'submitting a cessation notice
provides an option, rather than a clear intention to sign with other processors'

Hmmm. Unless they are offering a lot more dough up front why would any supplier stay?

Nobody would be fool enough to become an unsecured creditor?

[Newman]

Why would Bright do this ?
Lending $130m to Synlait is a better choice among bad options. Bright cannot let Synlait go into receivership now because of its cumulative investment of $200m. If Synlait survives, Bright get paid interest on the loan or the loan be converted into shares at a discount; if Synlait collaps at a later stage, the loan ranks before bondholders and shareholders, and Bright could recover the loan at least partially.

[billkiapi]

I may be wrong but isn’t Bright outright making a 130 mil loan to SML ?

Yes, so they are loaning the 130M they underwrote for the extension. All of the 130M is needed to pay debt on July 15. Synlait must be close to insolvent atm

[billkiapi]

And SML intends to use that loan to pay its lenders? That how I am reading it?

Yes, Bright moving from an underwrite with no security to presumably a secured loan- if everyone, and I mean pretty much everyone, agrees. All to pay the 130M due on the extended date of July 15 (which was extended by banks because Bright underwrote as I understand it).

On 2 April, Synlait said

The Board has received a letter of support from Bright Dairy, the company’s largest shareholder, which owns 39.01% of the shares in Synlait, that reinforces its ongoing support for Synlait. The letter includes a commitment to participate in a future equity raise and to extend a loan at the request of Synlait, subject to Synlait and Bright receiving all necessary approvals.

[Bikeguy]

Yes, Bright moving from an underwrite with no security to presumably a secured loan- if everyone, and I mean pretty much everyone, agrees. All to pay the 130M due on the extended date of July 15 (which was extended by banks because Bright underwrote as I understand it).

On 2 April, Synlait said

The Board has received a letter of support from Bright Dairy, the company’s largest shareholder, which owns 39.01% of the shares in Synlait, that reinforces its ongoing support for Synlait. The letter includes a commitment to participate in a future equity raise and to extend a loan at the request of Synlait, subject to Synlait and Bright receiving all necessary approvals.

So this is good then? They are doing what they said they would do?
If they thought it was a goner or they simply wanted to walk away they wouldn’t be going to the trouble of putting in another 130mil surely?

[Baa_Baa]

Paywalled, but apparently Bright Diary are up for the cap raise if required, on top of the $130m loan. https://businessdesk.co.nz/article/markets/debt-laden-synlait-says-farmers-want-out-and-it-needs-full-130m-shareholder-loan

The 'supplier exodus' is a bit overdone imo, because the actual exit (option) has a two year lead time.

[SailorRob]

Paywalled, but apparently Bright Diary are up for the cap raise if required, on top of the $130m loan. https://businessdesk.co.nz/article/markets/debt-laden-synlait-says-farmers-want-out-and-it-needs-full-130m-shareholder-loan

The 'supplier exodus' is a bit overdone imo, because the actual exit (option) has a two year lead time.


Yeah but if they are making commitments to others now for the third year, it's no longer really just an option.

Big if.

[SailorRob]

So if Balance is getting 100% of his money back from these bonds as he has assured us, then there must be one hell of an opportunity in them right now.

He by definition must have multiples of his net worth invested in these bonds by now.

Free money.

[Baa_Baa]

Yeah but if they are making commitments to others now for the third year, it's no longer really just an option.

Big if.

"big if", "they are making commitments to others now". Big if.

Personally I don't give toss about Synlait per se, except that A2M can have confidence in supply, especially China IF requiring the SAML that Synlait has, until MVM comes on stream. Assuming Bright essentially bails out Synlait through the loan and supporting a cap raise, then for at least the next two years, there is some degree of confidence in supply.

Interesting that there has been no mention of A2M in resolving Synlait's woes, except implied as a 19% shareholder, they will almost certainly have to vote for Bright to participate in a cap raise and likely take a much higher % of the company. Potentially though, Bright and A2M are colluding saying, hey Bright, you deal with the debt, we A2M will deal to the cap raise?

It will be interesting when A2M decide to show their hand, and what position they take. There is a lot at stake for A2M that Synlait survives, at least for the next couple of years.

[IAK]

RNZ's account. "More than half of Synlait Milk's suppliers want to quit" https://www.rnz.co.nz/news/business/518551/more-than-half-of-synlait-milk-s-suppliers-want-to-quit

[billkiapi]

So this is good then? They are doing what they said they would do?
If they thought it was a goner or they simply wanted to walk away they wouldn’t be going to the trouble of putting in another 130mil surely?

if Synlait tanked, the banks would have gone straight to Bright for the underwritten 130M that was extended. Bright appears to have no security for that- so they’re better off loaning 130M and getting security over the assets.

Can’t say it’s good news- but it’s not bad news for bond holders- but is bad news for shareholders imo as the bottom of the creditor list when the balloon goes up.

[billkiapi]

Yeah but if they are making commitments to others now for the third year, it's no longer really just an option.

Big if.

that supply risk must be keeping A2M up at night

[bull....]

liquidation value of assets would be well under book value of assets on synliat balance sheet i reckon. bond holders may not get 100% back

[SailorRob]

liquidation value of assets would be well under book value of assets on synliat balance sheet i reckon. bond holders may not get 100% back


*will not get 100% back nor anything close.

[bull....]

Glass half empty: More than half of Synlait Milk's suppliers want out
https://www.1news.co.nz/2024/06/03/glass-half-empty-more-than-half-of-synlait-milks-suppliers-want-out/

[Rawz]

SP is in for more beatings today

[Balance]

So this is good then? They are doing what they said they would do?
If they thought it was a goner or they simply wanted to walk away they wouldn’t be going to the trouble of putting in another 130mil surely?

So obvious why Bright is standing by its commitment to Synlait and putting in the $130m - deeds, not words. Nothing new to add to what I have written before.

Good interview with the new Chairman on what’s ahead for Synlait in article below.

The shares are going to struggle until the capital raising is out of the way (Bright has committed) and bond holders will get their monies back.

https://www.nzherald.co.nz/business/what-went-wrong-with-synlait-and-how-new-chairman-george-adams-plans-to-fix-it/564F7EK5EVHTXNBRSFGXQCXN7E/
Paywalled

[bull....]

SP is in for more beatings today

yep be surprised if it didnt , looking very terminal now with declining revenue's and increasing debt.
even a bright loan ( if it happens ) only delay's the death i reckon. as a loan cant stop revenue decline or debt increases.

[SailorRob]

So obvious why Bright is standing by its commitment to Synlait and putting in the $130m - deeds, not words. Nothing new to add to what I have written before.

Good interview with the new Chairman on what’s ahead for Synlait in article below.

The shares are going to struggle until the capital raising is out of the way (Bright has committed) and bond holders will get their monies back.

https://www.nzherald.co.nz/business/what-went-wrong-with-synlait-and-how-new-chairman-george-adams-plans-to-fix-it/564F7EK5EVHTXNBRSFGXQCXN7E/
Paywalled


Do you think they would say that bondholders wont get their money back?

If indeed they will, then it's the greatest opportunity you have ever seen. How much additional capital have you sunk into this opportunity?

Roughly speaking buying bonds today, if you get your money back what will the return be?

[Bikeguy]

If Bright did not want this business or saw it as a lost cause they would not have signalled their intent with the loan, committing to the CR etc…
Clearly they are going to keep SML a going concern and may even take it over at some point, and until then everyone is going to be helping them reduce the SML debt further by sharing the pain of the upcoming CR, even A2,
If they don’t Bright may get what they want? The removal of A2 blocking stake in SML, the Chinese could buy SML without even blinking…

[Rawz]

Only two options ahead;

1) big cap raise to clear all debt and put $10m in the bank. Need to give confidence to the farmer suppliers

Or

2) Let the dog go bust and the different interested parties can pick apart the carcass.

[Lego_Man]

Only two options ahead;

1) big cap raise to clear all debt and put $10m in the bank. Need to give confidence to the farmer suppliers

Or

2) Let the dog go bust and the different interested parties can pick apart the carcass.


My question is what are they waiting for re: the capital raise?

They could have executed any stage in the last 18 months but as they have waited, SP dropping like a stone.

[Bikeguy]

Only two options ahead;

1) big cap raise to clear all debt and put $10m in the bank. Need to give confidence to the farmer suppliers

Or

2) Let the dog go bust and the different interested parties can pick apart the carcass.

I feel you are right, and I feel that if they were going to let it go bust they would not be sticking in the 130mil at this stage,

[Rawz]

My question is what are they waiting for re: the capital raise?

They could have executed any stage in the last 18 months but as they have waited, SP dropping like a stone.

Yeah doesnt make much sense. Maybe Bright were not keen for so long as it takes awhile to get support from china to invest substantial more money on top of what they have already put in? The managers had a lot to explain.

[Baa_Baa]

Ruth Richardson stepping down, Leon Fung will be appointed as one of Bright’s appointed directors https://www.nzx.com/announcements/432209

[Bikeguy]

My question is what are they waiting for re: the capital raise?

They could have executed any stage in the last 18 months but as they have waited, SP dropping like a stone.

It is a dam good question..

[Filthy]

670 shares on the buy side, and 129,577 on the sell side. punters trying to run for the exit. only to find its not there.....

[Filthy]

market cap only 96M now. reckon in less than a few days itll be half that.

[Lego_Man]

670 shares on the buy side, and 129,577 on the sell side. punters trying to run for the exit. only to find its not there.....

But offer has disappeared on the bonds...

[Newman]

So obvious why Bright is standing by its commitment to Synlait and putting in the $130m - deeds, not words. Nothing new to add to what I have written before.

Good interview with the new Chairman on what’s ahead for Synlait in article below.

The shares are going to struggle until the capital raising is out of the way (Bright has committed) and bond holders will get their monies back.

https://www.nzherald.co.nz/business/what-went-wrong-with-synlait-and-how-new-chairman-george-adams-plans-to-fix-it/564F7EK5EVHTXNBRSFGXQCXN7E/
Paywalled

In the NZ Herald news The Chairman said:

“We have a very profitable business in Dunsandel [in Canterbury] - it’s a really strong business.”

Likewise, the consumer-oriented Dairyworks, which Synlait wants to sell to pay down debt, is also very profitable, he adds.

[SailorRob]

market cap only 96M now. reckon in less than a few days itll be half that.

You're obviously short then? Why wouldn't you he, borrow too high Im guessing

[Bikeguy]

In the NZ Herald news The Chairman said:

“We have a very profitable business in Dunsandel [in Canterbury] - it’s a really strong business.”

Likewise, the consumer-oriented Dairyworks, which Synlait wants to sell to pay down debt, is also very profitable, he adds.

They show no signs of panic do they…

[Newman]

As most shareholders cannot exit, it does not matter how the share price changes for capital raising.

[bull....]

if they do a cap raise it mean it be trading penny stock status , they would have to issue over a billions of shares to wipe debt out. not happening. even a billion shares at 20c is only 200m raise hardly going to help even with a 130m loan.
still have couple hundred + debt on falling revenue

wouldnt surprise me if bright and a2 talking about the carcas

[Filthy]

You're obviously short then? Why wouldn't you he, borrow too high Im guessing

no not at all SR; sadly, I got in on SAMR news (which was +ve, & could've/should've been the point to undertake a CR) & out again a few months later at a loss. allocated funds elsewhere & now just an observer; with a side-interest via ATM. didn't mean to downramp; just calling it how I see it!

[Balance]

My question is what are they waiting for re: the capital raise?

They could have executed any stage in the last 18 months but as they have waited, SP dropping like a stone.

Bright making their move, one chess piece at a time.

Everything working according to plan imo.

[Bikeguy]

Bright making their move, one chess piece at a time.

Everything working according to plan imo.

Have to say that’s my feeling on it too,

[Bikeguy]

[QUOTE=bull....;1055306]if they do a cap raise it mean it be trading penny stock status , they would have to issue over a billions of shares to wipe debt out. not happening. even a billion shares at 20c is only 200m raise hardly going to help even with a 130m loan.
still have couple hundred + debt on falling revenue

What you are saying is right…so one has to think that Bright are either going to take it over, or take it over in a JV with A2,
Because a CR at these values does not make sense surely?
Letting it go to receivers would be a risk to both Bright and A2 so I don’t really see that happening…but letting the SP take a hammering in order to soften the market up for a low takeover offer seems plausible,

[Balance]

[QUOTE=bull....;1055306]if they do a cap raise it mean it be trading penny stock status , they would have to issue over a billions of shares to wipe debt out. not happening. even a billion shares at 20c is only 200m raise hardly going to help even with a 130m loan.
still have couple hundred + debt on falling revenue

What you are saying is right…so one has to think that Bright are either going to take it over, or take it over in a JV with A2,
Because a CR at these values does not make sense surely?
Letting it go to receivers would be a risk to both Bright and A2 so I don’t really see that happening…but letting the SP take a hammering in order to soften the market up for a low takeover offer seems plausible,

Have a look at SKT CR.

[Balance]

[QUOTE=bull....;1055306]if they do a cap raise it mean it be trading penny stock status , they would have to issue over a billions of shares to wipe debt out. not happening. even a billion shares at 20c is only 200m raise hardly going to help even with a 130m loan.
still have couple hundred + debt on falling revenue

What you are saying is right…so one has to think that Bright are either going to take it over, or take it over in a JV with A2,
Because a CR at these values does not make sense surely?
Letting it go to receivers would be a risk to both Bright and A2 so I don’t really see that happening…but letting the SP take a hammering in order to soften the market up for a low takeover offer seems plausible,

Have a look at SKT CR.

From memory, SKT’s sp had been as high as $8+ before the change in its fortune. By the time the CR was initiated, sp was fine to 18c and rights issue was done at 12c. Suited some parties very very well to have it done at that price!!!

I don’t see a takeover by Bright - don’t forget A2M has a blocking stake and plenty of $$$$!

[Nor]

Things must be bad for synlait, on the price chart on the improved nzx site the price axis extends down to -$1 and -$2.

[SailorRob]

no not at all SR; sadly, I got in on SAMR news (which was +ve, & could've/should've been the point to undertake a CR) & out again a few months later at a loss. allocated funds elsewhere & now just an observer; with a side-interest via ATM. didn't mean to downramp; just calling it how I see it!

Yep fair enough

[bull....]

[QUOTE=Bikeguy;1055318]

Have a look at SKT CR.

From memory, SKT’s sp had been as high as $8+ before the change in its fortune. By the time the CR was initiated, sp was fine to 18c and rights issue was done at 12c. Suited some parties very very well to have it done at that price!!!

I don’t see a takeover by Bright - don’t forget A2M has a blocking stake and plenty of $$$$!

difference was SKT financial situation. big difference in SML financials and outlook.

nuplex was another capital raise at 20c but financial situation different as well.

[nztx]

https://www.nzherald.co.nz/business/bright-dairy-replaces-former-finance-minister-ruth-richardson-with-leon-fung-on-synlait-board/223PWCIP2RDPHK2F454VIHVHAE/

Bright Dairy replaces Former Finance Minister Ruth Richardson with Leon Fung on Synlait board

Will sailing "Ruth-Less" help things ? ;)

[Balance]

difference was SKT financial situation. big difference in SML financials and outlook.

nuplex was another capital raise at 20c but financial situation different as well.

Really?

This is what you wrote back then :


terrible as expected , revenue increase due to higher subscriber numbers doesnt mask the fact all other metrics are going backwards. competitor activity only likely to become more intense as more enter the market. only hope long term is someone buying the company in the future for the digital platform.

Big difference is that SML has two major shareholders with deep pockets, both of who are in and want SML for strategic reasons.

[Sideshow Bob]

https://www.nzherald.co.nz/business/bright-dairy-replaces-former-finance-minister-ruth-richardson-with-leon-fung-on-synlait-board/223PWCIP2RDPHK2F454VIHVHAE/

Bright Dairy replaces Former Finance Minister Ruth Richardson with Leon Fung on Synlait board

Will sailing "Ruth-Less" help things ? ;)

The 2nd last line of the NZX announcement - "Bright has a 39.0% shareholding in Synlait and four Board seats"

Board clearly under the control of Bright - 7 directors and 4 are from Bright. Never really understood why no A2 appointed directors? Are they driving the exclusive supply disagreement between Synlait and A2?

I would agree that Bright have a plan here, very patient. Presumably they have a plan B if shareholder vote goes against the Bright loan.

This will become a case study in the future once all of this has worked through.........likely on so many facets of business - governance, management, BCorp, acquisitions, plant expansions, more governance, lack of governance.....

Clearly Synlait are rubbish at alot of things, but not their website - Ruth already gone and replaced by Leon!! https://www.synlait.com/people/

[kiwikeith]

https://www.nzherald.co.nz/business/bright-dairy-replaces-former-finance-minister-ruth-richardson-with-leon-fung-on-synlait-board/223PWCIP2RDPHK2F454VIHVHAE/

Bright Dairy replaces Former Finance Minister Ruth Richardson with Leon Fung on Synlait board

Will sailing "Ruth-Less" help things ? ;)

Not the first Board to conclude that skills needed to be an MP are not those required to run a company.

[Sideshow Bob]

Not the first Board to conclude that skills needed to be an MP are not those required to run a company.

Only taken 20 years!! :scared:

[Bikeguy]

[QUOTE=Sideshow Bob;1055391]

“This will become a case study in the future once all of this has worked through.........likely on so many facets of business - governance, management, BCorp, acquisitions, plant expansions, more governance, lack of governance…”


It certainly will, either way I have learned some pretty good lessons from SML, the biggest don’t be in a hurry to catch a falling knife😅

[Balance]

Not the first Board to conclude that skills needed to be an MP are not those required to run a company.

To be fair, nobody can complain about how well SML did for the first 16 years of the last 20 years. The company not only prospered and gained the support of many dairy farmers for adding value and much needed real competition into the industry (while Fonterra was burning through hundreds of millions of dollars on its ill-conceived and disastrous overseas expansion).

And yes, there comes a time when new direction and vision are needed and in that front, SML failed miserably post Covid.

[Balance]

It certainly will, either way I have learned some pretty good lessons from SML, the biggest don’t be in a hurry to catch a falling knife��

Yup … most of us have made that mistake and learnt the hard way!

In the case of SML, wait for the capital raising. Just like SKT, there’s excellent gains to be made but need to get the timing right.

[whatsup]

The SML life will IMO be very interesting for the rest of this year, and "IF " they can get it over this hump it could have a fighting chance but there are too many questions that need answers for me.

[Lego_Man]

Bonds cracked the 100% yield mark today - incredible really. Noting that the price is actually still above its lows due to the effect of passage of time as we get close to nominal maturity.

[Bikeguy]

Bonds cracked the 100% yield mark today - incredible really. Noting that the price is actually still above its lows due to the effect of passage of time as we get close to nominal maturity.

Does that mean for every dollar invested in a bond you receive $2?

[silverblizzard888]

Does that mean for every dollar invested in a bond you receive $2?

No the percent is based annually, so you would have to calculate how much time for the bond to mature to know the exact amount you get.

[SailorRob]

Bonds cracked the 100% yield mark today - incredible really. Noting that the price is actually still above its lows due to the effect of passage of time as we get close to nominal maturity.

Remember, according to balance you are 100% guaranteed to get all your money back.

[Balance]

Bonds cracked the 100% yield mark today - incredible really. Noting that the price is actually still above its lows due to the effect of passage of time as we get close to nominal maturity.

Nothing compared to the carnage of the share price - it’s less than 10c in the dollar for those who bought a few years ago for over $5.00.

Kinda puts things in perspective?

[SailorRob]

[QUOTE=Sideshow Bob;1055391]

“This will become a case study in the future once all of this has worked through.........likely on so many facets of business - governance, management, BCorp, acquisitions, plant expansions, more governance, lack of governance…”


It certainly will, either way I have learned some pretty good lessons from SML, the biggest don’t be in a hurry to catch a falling knife😅

At the time you never know if it's a falling knife. Often you blink you miss.

[Bikeguy]

[QUOTE=Bikeguy;1055403]

At the time you never know if it's a falling knife. Often you blink you miss.

Yes, seems I have a knack for that as well…have sat back a few times and missed the boat…
If I manage to scrape out of SML by some miracle it’s off to Milford fund or such for me😅

[SailorRob]

[QUOTE=SailorRob;1055533]

Yes, seems I have a knack for that as well…have sat back a few times and missed the boat…
If I manage to scrape out of SML by some miracle it’s off to Milford fund or such for me😅

Don't touch it, you'll just underperform. Fees too high, allocation wonky.

Just buy Berkshire and sit on your arse.

[Bikeguy]

With the signaled CR if Bright were to achieve a 50% threshold could they make a takeover offer on SML?
If Bright were under writing it, and A2 participated fully, there would be every chance that Bright would pickup another 10% just by all the potential retail not taking part?

If that did happen does it go to a board vote and then shareholders vote? Bright now have majority in the Board, so what percent of shareholders have to say yes to see a takeover succeed? If this scenario can even happen?

[Balance]

Remember, according to balance you are 100% guaranteed to get all your money back.

To each their own, SR.

I stick to my view and you stick with your OCA float (which unfortunately is sinking!).

[moimoi]

The tragedy of possible outcomes overblown for SML imo..

One could look to offshore for clues.

The commodity mining industries have recently come to the conclusion that in the current environment it's cheaper to buy operating mines than fund the escalating inflationary capex of permitting, financing, and constructing a new mine. (See recent GOR and BHP failed takeover offers amongst others)

More than 1 interested bidder for Pokeno me thinks. And any RE agent will tell you....all they need is more than 1 buyer. ;-)

(Near new, permitted, compliant, high quality construction, with spec'd out refit, committed workforce, located next to local suppliers and export ports, and possibly a distressed sale available @ under replacement cost)

Underutilised currently but at its core that is only a marketing problem surely.

A deep pocketed buyer with a long term view, offering and guaranteeing a short term 3 yr fixed price fixed term contract @ $12 KGms, could well solve the marketing problem.

And potentially, could find the recently Bank defined "over leveraged" Waikato dairy farmer being required to move to SML as a condition of maintaining their existing Bank lending.

Catastrophic short term-ism could be proven to be alive and well in this whole caper imo.

GLTA.

[Newman]

With the signaled CR if Bright were to achieve a 50% threshold could they make a takeover offer on SML?
If Bright were under writing it, and A2 participated fully, there would be every chance that Bright would pickup another 10% just by all the potential retail not taking part?

If that did happen does it go to a board vote and then shareholders vote? Bright now have majority in the Board, so what percent of shareholders have to say yes to see a takeover succeed? If this scenario can even happen?

If Bright Dairy does make a takeover offer, shareholders should appreciate it. The market values the bonds at 64 cents. Shareholders rank behind bondholders. How could a shareholder get anything back if bondholders cannot be paid in full?

[SailorRob]

To each their own, SR.

I stick to my view and you stick with your OCA float (which unfortunately is sinking!).


Yep but it wasn't your view, you guaranteed it.

You said you would get 100% of your money back and the interest.

[Bikeguy]

[QUOTE=moimoi;1055568]The tragedy of possible outcomes overblown for SML imo..

Appreciate you taking the time to share your thoughts Moimoi, can I ask you what you think, in your opinion is a likely out of all this for SML?
Cheers

[Balance]

Yep but it wasn't your view, you guaranteed it.

You said you would get 100% of your money back and the interest.

Getting desperate to put words in my mouth, SailorRob?

Refer all to my post and read what I wrote.

You figured out why OCA float is actually a sink yet?

[blackcap]

If Bright Dairy does make a takeover offer, shareholders should appreciate it. The market values the bonds at 64 cents. Shareholders rank behind bondholders. How could a shareholder get anything back if bondholders cannot be paid in full?

Correct, if bondholders cannot get paid back, shareholders will get zero.

[billkiapi]

If it all fails, and it might, shareholders get nothing unless there's something left over from Bank/Bright debt>bondholders>shareholders. What a massive destruction of value driven by pure arrogance from what I can see. New board, albeit stacked with Brighters, might be able to pull it out of a dive, but the damage will be long lasting.

[Balance]

Not yet, have just liquidated positions in the US to increase my shareholding so hopefully I figure it out before that happens.

I won't ever forget your post, I have it saved.

You told ValueNZ you would get every cent of your bond money back and interest.

Once the time is right, it will be presented to you on a plate for you to eat.

As I have stated before, please post the link of my reply to ValueNZ for all to see.

Unlike you, I put my money where my mouth is.

[Balance]

Into tropical holiday homes?

Into my tropical holiday home amongst other things like shares and bonds.

Why the obsession with my holiday home? I don’t post nor do I need to post spin, BS and lies unlike certain individuals. I post opinions and facts.

It is a big deal for me for sure as it's something to look forward to when the cold weather starts setting in. But it is no different from holiday makers making their way to tropical spots. One difference I guess is that it is also an investment and something I can leave for my children and future generations.

[Goob]

Anyone know if the Bright loan can or will rank above the subordinated bonds?

[billkiapi]

Almost certainly will be secured over assets with priority. So it will come before bonds.

[Nor]

Are yatchs an investment?

[kiora]

Are yatchs an investment?

No but a beach house is ;)

[whatsup]

Could SML transfer the Chinese A2 manufacturing agreement for I F from Dunsandal to Pokeno and for A2M then to buy that manufacturing operation paying what is necessary in order to achieve a agreeable sale for all parties and that would leave SML to carry on its own business in the plants that are left ?

[Golfer01]

Could SML transfer the Chinese A2 manufacturing agreement for I F from Dunsandal to Pokeno and for A2M then to buy that manufacturing operation paying what is necessary in order to achieve a agreeable sale for all parties and that would leave SML to carry on its own business in the plants that are left ?

I'm 99% sure that can't happen. SAMR is based on processor and that location (Rakaia). CL can only be produced in Rakaia for a2ML.

[Newman]

Could SML transfer the Chinese A2 manufacturing agreement for I F from Dunsandal to Pokeno and for A2M then to buy that manufacturing operation paying what is necessary in order to achieve a agreeable sale for all parties and that would leave SML to carry on its own business in the plants that are left ?

Synlait's Chairman told NZ Herald:

Dunsandel makes a wide range of products from infant formula to milk powder to lactoferrin.

It’s a big site - so big that workers need bicycles to get around it.

The theory being kicked around investment banking circles that a2 could be a buyer is not being given much credence: Dunsandel makes hundreds of thousands of tonnes of product, not just infant formula.

If a2 Milk ended up with Dunsandel, it would have a lot of capacity that it has no use for.

[Sideshow Bob]

Synlait's Chairman told NZ Herald:

Dunsandel makes a wide range of products from infant formula to milk powder to lactoferrin.

It’s a big site - so big that workers need bicycles to get around it.

The theory being kicked around investment banking circles that a2 could be a buyer is not being given much credence: Dunsandel makes hundreds of thousands of tonnes of product, not just infant formula.

If a2 Milk ended up with Dunsandel, it would have a lot of capacity that it has no use for.

A2 has the majority shares in a business that produces other products and not just IF......

[whatsup]

Synlait's Chairman told NZ Herald:

Dunsandel makes a wide range of products from infant formula to milk powder to lactoferrin.

It’s a big site - so big that workers need bicycles to get around it.

The theory being kicked around investment banking circles that a2 could be a buyer is not being given much credence: Dunsandel makes hundreds of thousands of tonnes of product, not just infant formula.

If a2 Milk ended up with Dunsandel, it would have a lot of capacity that it has no use for.

Yes, but couldnt some of the capacity be sold back to SML or "other " interested parties ?

[Balance]

Why Bright Dairy Can't and Won't let Synlait fail

https://businessdesk.co.nz/article/primary-sector/why-bright-dairy-cant-and-wont-let-synlait-fail
paywalled

[Bikeguy]

Why Bright Dairy Can't and Won't let Synlait fail

https://businessdesk.co.nz/article/primary-sector/why-bright-dairy-cant-and-wont-let-synlait-fail
paywalled

It would be good to know what’s in this article?

[billkiapi]

From what I read- Bright have not got internal approvals for the 130M, nor Synlait board approval and then shareholder approval. We are 5 weeks away from
armageddon so let’s hope all is revealed soon.

[Bikeguy]

From what I read- Bright have not got internal approvals for the 130M, nor Synlait board approval and then shareholder approval. We are 5 weeks away from
armageddon so let’s hope all is revealed soon.

When you say internal approvals what do you mean?

[winner69]

When you say internal approvals what do you mean?

From that article -

In a notice to the Shanghai stock exchange on June 5, translated from Chinese to English, the NZ dairy processor’s largest shareholder said it planned to extend an emergency loan to Synlait, subject to approval from its board and shareholders. Enclosed in the notice was an investment risk warning, flagging investors to exercise caution due to the uncertainties and pending approval process for the loan.

[Newman]

From that article -

In a notice to the Shanghai stock exchange on June 5, translated from Chinese to English, the NZ dairy processor’s largest shareholder said it planned to extend an emergency loan to Synlait, subject to approval from its board and shareholders. Enclosed in the notice was an investment risk warning, flagging investors to exercise caution due to the uncertainties and pending approval process for the loan.

Bright Dairy's shareholder's annual conference was held in Shanghai on May 30, 2024, and all resolutions were passed at voting rates of >98%.

Synlait's shareholders will not be foolish to reject Bright's loan and immdediately put the company in receivership.

[Bikeguy]

Bright Dairy's shareholder's annual conference was held in Shanghai on May 30, 2024, and all resolutions were passed at voting rates of >98%.

Synlait's shareholders will not be foolish to reject Bright's loan and immdediately put the company in receivership.

I feel you are right, I just cannot see A2 being willing to force it to that outcome…and everyone else has no choice? Banks, shareholders etc

[Balance]

Bright Dairy's shareholder's annual conference was held in Shanghai on May 30, 2024, and all resolutions were passed at voting rates of >98%.

Synlait's shareholders will not be foolish to reject Bright's loan and immdediately put the company in receivership.

The approvals in the article refer more to Synlait's board and shareholders rather than Bright Dairy (inconceivable pre-approvals not in place) as the loan of $130m is not material given Bright's total assets of over $5 billion and market cap of over $2 billion.

Fly in the ointment is A2M who could conceivably vote against the Bright loan.

[Bikeguy]

The approvals in the article refer to Synlait's board and shareholders rather than Bright Dairy as the loan of $130m is not material given Bright's total assets of over $5 billion and market cap of over $2 billion.

Fly in the ointment is A2M who could conceivably vote against the Bright loan.

I am hoping it doesn’t happen, that A2 votes no, but yes you are right the risk is there, they will have their strategy as well, this is going to be either a massive change up for SML or it’s going to just plod along with Bright plugging the gaps as they arise…

[Balance]

I am hoping it doesn’t happen, that A2 votes no, but yes you are right the risk is there, they will have their strategy as well, this is going to be either a massive change up for SML or it’s going to just plod along with Bright plugging the gaps as they arise…

Bright will not be plugging the hole as they arise.

They are moving their chess pieces one at a time as the pieces are already all in place imo.

As I have written before, imagine a scenario where Bright opens up its distribution and sales channels to Synlait products after it gains control. What then?

[whatsup]

Bright will not be plugging the hole as they arise.

They are moving their chess pieces one at a time as the pieces are already all in place imo.

As I have written before, imagine a scenario where Bright opens up its distribution and sales channels to Synlait products after it gains control. What then?

Its called " the long game ! "

[Newman]

Bright will not be plugging the hole as they arise.

They are moving their chess pieces one at a time as the pieces are already all in place imo.

As I have written before, imagine a scenario where Bright opens up its distribution and sales channels to Synlait products after it gains control. What then?

It's not if, but when, and at a big discount to A2M's IF retail price. At that time, A2M's share price would repeat what Synlait has experienced in the past two years.

On May 30, 2024, The Chinese Communist Party Boss of Shanghai visited Bright Dairy and expressed support for Bright's strategy, suggesting Bright has completed all preparations for actions, including a dividend policy change to allow cutting cash dividends to 20% of net profit when big spending is required.

[whatsup]

It's not if, but when, and at a big discount to A2M's IF retail price. At that time, A2M's share price would repeat what Synlait has experienced in the past two years.

On May 30, 2024, The Chinese Communist Party Boss of Shanghai visited Bright Dairy and expressed support for Bright's strategy, suggesting Bright has completed all preparations for actions, including a dividend policy change to allow cutting cash dividends to 20% of net profit when big spending is required.

Are you saying that A2M will then be a price taker, I would have thought that A2 would have had a SRP agreement with its purchasers ! Bright Dairy should still be one of many purchasers in China or would they form a buying cartel in China ( which I thought is illegal ) ?

[Bikeguy]

Are you saying that A2M will then be a price taker, I would have thought that A2 would have had a SRP agreement with its purchasers ! Bright Dairy should still be one of many purchasers in China or would they form a buying cartel in China ( which I thought is illegal ) ?

Personally I hope that this can all be resolved in a win win for both of these companies, they both did well when they were working well together…hopefully this can be the case again as to me it looks on the face of it to be fairly simple?

However I am still not convinced that they are actually a war with each other, I’m still quite sceptical of that, my personal belief is this is all very much a strategy, one driven primarily by Bright, with A2 a valuable but very much captured partner along for the ride …just my personal opinion

[Balance]

Personally I hope that this can all be resolved in a win win for both of these companies, they both did well when they were working well together…hopefully this can be the case again as to me it looks on the face of it to be fairly simple?

However I am still not convinced that they are actually a war with each other, I’m still quite sceptical of that, my personal belief is this is all very much a strategy, one driven primarily by Bright, with A2 a valuable but very much captured partner along for the ride …just my personal opinion

A2 invested $288m in SML - $100m+ more than Bright.

A lot for A2 to lose if an amicable agreement is not reached by all parties concerned. Then, there’s the matter of the SAMR to export A2 IF into China.

[billkiapi]

A2M and a handful of other shareholders can stop the loan proceeding at the vote, and they've already "lost" their capital investment anyway so why not. They have options such as arbitration of the dispute and Yashili. What's interesting is the need for 10 days notice for an SGM for the vote which means we are really talking end of June-ish if the notices came out this week. If July 15 comes around and Synlait doesn't pay, the banks call on the underwriter (Bright) who have no security - basically they'd burn 130M and get nothing. It'd be a big move for A2M but not out of the question.

[Bikeguy]

A2M and a handful of other shareholders can stop the loan proceeding at the vote, and they've already "lost" their capital investment anyway so why not. They have options such as arbitration of the dispute and Yashili. What's interesting is the need for 10 days notice for an SGM for the vote which means we are really talking end of June-ish if the notices came out this week. If July 15 comes around and Synlait doesn't pay, the banks call on the underwriter (Bright) who have no security - basically they'd burn 130M and get nothing. It'd be a big move for A2M but not out of the question.

I agree it’s definitely not out of the equation, if I wasn’t holding both companies I would be happily sitting by with a lot of interest to see how this plays out …as it is I am unhappily sitting by with great interest to see how it all plays out, lol

[billkiapi]

Have to wonder what SML did to annoy A2M that it has got this bad

[shareman]

Have to wonder what SML did to annoy A2M that it has got this bad

Egos usually

[Newman]

Copied from Australian Financial Review 2/6/2024:
The a2 Milk Co depends on Synlait for more than 90 per cent of its infant formula. But The a2 Milk Co last year cancelled the exclusive manufacturing rights for most of the group’s infant formula supply and there have been simmering tensions between the two companies. A binding confidential arbitration process is continuing, with an outcome due in November.

[Newman]

DairyNews: https://www.ruralnewsgroup.co.nz/dairy-news/dairy-opinion/editorial-time-running-out-for-synlait
This helped reduce the share price of Synlait, though relying on news media for investment decisions would be wrong.

[nztx]

Interesting article just penned by a Wellington stockbroker on this can of worms ;)

[Bikeguy]

Interesting article just penned by a Wellington stockbroker on this can of worms ;)

What is he saying? Cheers

[percy]

What is he saying? Cheers

go to www.chrislee.co.nz taking stock

[Bikeguy]

go to www.chrislee.co.nz taking stock

Thank you, appreciated

[billkiapi]

still no 10 day notice of the vote. Cutting it fine to get shareholder approvals which are needed, and I imagine the banks won't be keen to give up security so that Bright get some cover for their 130M loan (as opposed to their unsecured underwrite). SP plummeting, bonds going through the roof. Soon they'll have a DNR sign around their neck.

[Toddy]

still no 10 day notice of the vote. Cutting it fine to get shareholder approvals which are needed, and I imagine the banks won't be keen to give up security so that Bright get some cover for their 130M loan (as opposed to their unsecured underwrite). SP plummeting, bonds going through the roof. Soon they'll have a DNR sign around their neck.

Why is this not in a permanent trading halt while it's sorted out.
Surely the terms are fundamentally attached to the ability of SML to trade as a going concern.

Or do the regulators just continue to turn a blind eye until it's too late. Which it already is in my opinion. Wild West right here.

[Lego_Man]

Why is this not in a permanent trading halt while it's sorted out.
Surely the terms are fundamentally attached to the ability of SML to trade as a going concern.

Or do the regulators just continue to turn a blind eye until it's too late. Which it already is in my opinion. Wild West right here.

Lowest yield bid on the bonds is 150%.

[Lego_Man]

Although YTM is irrelevant now, basically we're talking about impaired asset valuation. So Bond Price = Probability of Default x Residual Value after haircut.

So this market is saying at a starting point at 60c on the dollar for the bonds, 100% chance Synlait defaults, and in that situation investors get haircut by 40%. Or any combination of a lower default probability and higher haircut rate.

What's the fire sale NTA you reckon versus the debt load?

[Toddy]

That's the million dollar question and why there should be a trading halt.

The banks just want their money back. Bright and A2 have had a plan all along.
With no farmer base to supply milk, then you can guarantee that the bond holders will take a massive haircut and the deal to current shareholders will be like swollowing a dead parrot.

[Newman]

Why is this not in a permanent trading halt while it's sorted out.


I guess Bright Dairy and A2M do not want a trading halt. The share price's continued fall could help them negotiate loan terms and CR conditions.

[Lego_Man]

That's the million dollar question and why there should be a trading halt.

The banks just want their money back. Bright and A2 have had a plan all along.
With no farmer base to supply milk, then you can guarantee that the bond holders will take a massive haircut and the deal to current shareholders will be like swollowing a dead parrot.

Yep - the market is saying that the company is not a going concern. I'm torn, as investors should still have the right to speculate whether this is the case or not.

[Toddy]

Yep - the market is saying that the company is not a going concern. I'm torn, as investors should still have the right to speculate whether this is the case or not.

I wouldn't believe the market in this case. It's not informed and even the experts cannot work out the end game.

The attitude all along has been one of 'it's too big to fail'. It's not going to fail, it will just have new ownership at penny's in the dollar.

[Newman]

Bonds ended @160%.

[Newman]

I believe Synlait will make an announcement next Monday, the interest payment date. As the Chinese Premier has finished visiting New Zealand, Bright Dairy should have sorted out the loan issue.

[Toddy]

Bonds ended @160%.

Fair enough. Load up the proceeds on the Warriors at $1.90.

Decent ask volumes at that price too. Maybe an informed investor.

[nztx]

What would a Corporate undertaker's party yield up ?

Who would likely wind up on the ropes & who would be seen disappearing into the distance
dragging the prize - even as a joint effort to run & hide ? :)

Even some deeply discounted bonds being waved to throw on the fire to further drive the negotiating points home ..

[Bikeguy]

The Chinese (Bright) have massive financial resources and 500 mil is nothing to them…the big question is how they are going to play it, fair or turn the screws to take advantage of the situation?
Many of their farmers will have shares in SML and I believe Bright will be very aware of this fact…hurting them is not long term smart,

[Newman]

Is it possible for Synlait to avoid bankruptcy following Silver Fern Frams' approach many years ago? Shanghai Maling Food injected $260 m to get half of SFF, and other shareholders kept the other half for dividend benefits. Of course, SFF was in a much better position than Synlait now.

Both Bright Dairy and Shanghai Maling Food are controlled by Shanghai Bright Food Group.

[Bikeguy]

My thoughts are Bright want SML, and doing it in a JV with A2 makes the most sense, both financially and politically…has all this posturing and positioning by both companies just been negotiating tactics between themselves ? Only time will tell…but if you were going to make a takeover offer now’s a pretty good time considering the SP…

[Lego_Man]

My thoughts are Bright want SML, and doing it in a JV with A2 makes the most sense, both financially and politically…has all this posturing and positioning by both companies just been negotiating tactics between themselves ? Only time will tell…but if you were going to make a takeover offer now’s a pretty good time considering the SP…

We are so close to the razor wire now, the price of the bonds is saying that the equity is a zero. Dump in bonds on Friday suggests no confidence a deal can be reached to preserve the company in its current form (as noted by others on the timing/notice required for a meeting)...one would think now that we are headed into administration/receivership in the next couple of weeks? And therefore that the vultures will pick over the carcass later.

[Bikeguy]

We are so close to the razor wire now, the price of the bonds is saying that the equity is a zero. Dump in bonds on Friday suggests no confidence a deal can be reached to preserve the company in its current form (as noted by others on the timing/notice required for a meeting)...one would think now that we are headed into administration/receivership in the next couple of weeks? And therefore that the vultures will pick over the carcass later.

I agree with you that we are at the show and tell stage now, cards have to be turned up…
If it goes to the receivers I can’t see anyone being willing to bid against Bright, no one would want to pick up Dunsandel against them, SML made no secret about Brights help in securing SAMR, a not very subtle threat at the time I felt,
But equally Bright must know that winning it this way would be an equally poison chalice, a bad look and a lot of pissed of Kiwi farmers…
Your right though, it’s on razor wire for either way now.
What a shame it’s come to this, Two great companies that made a great team.

[Newman]

I agree with you that we are at the show and tell stage now, cards have to be turned up…
If it goes to the receivers I can’t see anyone being willing to bid against Bright, no one would want to pick up Dunsandel against them, SML made no secret about Brights help in securing SAMR, a not very subtle threat at the time I felt,
But equally Bright must know that winning it this way would be an equally poison chalice, a bad look and a lot of pissed of Kiwi farmers…
Your right though, it’s on razor wire for either way now.
What a shame it’s come to this, Two great companies that made a great team.

Bright Dairy and A2 Milk would not be silly to let other shareholders, some of whom are farmers, lose completely. At Friday's share price, the market value for the shares not held by Bright and A2M was $28M only. Dealing with the aftermath by letting Synlait go into receivership would cost more than $28M.

After all, Bright and/or A2M want to get Synlait at a discount price and run it profitably rather than convert other shareholders into enemies and make future business unsustainable.

[billkiapi]

Question is- can A2M let Bright control their manufacturing? And can Bright make Dunsandel profitable without A2M. Let’s hope there os a hotline between the two.

[Sideshow Bob]

Question is- can A2M let Bright control their manufacturing? And can Bright make Dunsandel profitable without A2M. Let’s hope there os a hotline between the two.

i would see that Bright already do control their (China) manufacturing. Bright control the board and a2 have no representation. The Synlait/a2 relationship must be discussed at board level and the course of the relationship/dispute must be heavily influenced or agreed to by the board. Not sure if the independent directors have been there long enough or have sufficient power to influence??

[RTM]

I am wondering if Fonterra have a role to play in any of this ? Presumably some nice modern factories, probably all converted to electric boilers.

[Bikeguy]

i would see that Bright already do control their (China) manufacturing. Bright control the board and a2 have no representation. The Synlait/a2 relationship must be discussed at board level and the course of the relationship/dispute must be heavily influenced or agreed to by the board. Not sure if the independent directors have been there long enough or have sufficient power to influence??

My thoughts are similar, it’s hard not to see how A2 production is not controlled by Bright…they make the produce, they dominate the board, they “helped” with the SAMR license that allows the product to be sold into A2’s biggest market…
A2 is currently a controlled customer, I understand this may change going forward but even their next options are Chinese? So regardless of the factory A2’s production channel is going to have a Chinese partner.
I cannot believe A2 would deliberately go to war so my thoughts are Bright are driving most of this strategy.

[Bikeguy]

I am wondering if Fonterra have a role to play in any of this ? Presumably some nice modern factories, probably all converted to electric boilers.

Are you thinking Fonterra would purchase in the event of receiver’s?

[Bikeguy]

Let’s hope there is a hotline between the two.

It would be great if there was, remember when they were a great partnership, was great for both…

[billkiapi]

They did well for years, I think Synlait lost sight of that and stated to throw their weight around with A2M. Bond interest payment due tomorrow, I do hope they have that sorted otherwise this will collapse spectacularly

[Bikeguy]

They did well for years, I think Synlait lost sight of that and stated to throw their weight around with A2M. Bond interest payment due tomorrow, I do hope they have that sorted otherwise this will collapse spectacularly

I’m in agreement with you that I think SML are driving this…
The why is the big question…and yes, tomorrow is going to be an interesting day😅

[Balance]

I’m in agreement with you that I think SML are driving this…
The why is the big question…and yes, tomorrow is going to be an interesting day��

Zero doubt that the bond interest will get paid tomorrow.

[Bikeguy]

Zero doubt that the bond interest will get paid tomorrow.

I am in agreement with you, I cannot see them defaulting

[bull....]

new lows coming :scared: RIP

[Bikeguy]

new lows coming :scared: RIP

Did they default??

[Newman]

Did they default??

Interest on SML010 bonds was paid today.

[Bikeguy]

Interest on SML010 bonds was paid today.

Appreciated, thank you…step in the right direction surely?

[bull....]

or did they pay it from bright's loan ?

[Bikeguy]

or did they pay it from bright's loan ?

How much was due?

[Lego_Man]

How much was due?

$1.7m by my calculation.

[Bikeguy]

I have narrowed it down to two scenarios in my head regarding SML,
That Bright want to take it over completely as cheap as they can, forcing A2 out.
That Bright want to take it over completely with A2 as a partner, as cheaply as they can.
Thoughts anyone?

[ralph]

I have narrowed it down to two scenarios in my head regarding SML,
That Bright want to take it over completely as cheap as they can, forcing A2 out.
That Bright want to take it over completely with A2 as a partner, as cheaply as they can.
Thoughts anyone?

Either way a t m have sold kiwis out thinking they are in for a pay day clever eh .
If the Chinese bang big tariffs on the European dairy sector as stated in response to the Ursula trade war then surely they will need synlaits products more than ever

[bulltrap]

I have narrowed it down to two scenarios in my head regarding SML,
That Bright want to take it over completely as cheap as they can, forcing A2 out.
That Bright want to take it over completely with A2 as a partner, as cheaply as they can.
Thoughts anyone?

My layman's guess is ultimately a partnership between Bright and A2, with Bright upping its stake to over 50% and A2 picking up the rest. Maybe similar to the 51%-49% partnership with Synlait's former parent company, prior to listing.

For Bright, the political optics of having a local partner are good, and they can keep calling Synlait their subsidiary. A2 needs to stay involved, and has deep pockets to help with recapitalisation.

[Bikeguy]

Either way a t m have sold kiwis out thinking they are in for a pay day clever eh .
If the Chinese bang big tariffs on the European dairy sector as stated in response to the Ursula trade war then surely they will need synlaits products more than ever

I’m in two minds about A2, you could be right about the selling out, but do they really have much of a choice if that’s true? I think there is a real possibility that they are trying really hard to get the best outcome for the shareholders (of which they are a big one) as possible…I feel they could be working hard behind the curtain but cannot really discuss the situation, hence why they have just really said nothing publicly about what is going on…

[Bikeguy]

My layman's guess is ultimately a partnership between Bright and A2, with Bright upping its stake to over 50% and A2 picking up the rest. Maybe similar to the 51%-49% partnership with Synlait's former parent company, prior to listing.

For Bright, the political optics of having a local partner are good, and they can keep calling Synlait their subsidiary. A2 needs to stay involved, and has deep pockets to help with recapitalisation.

I think what your saying makes the most sense…

[aperitif]

Bang on, this will be truly transformational for a2 with BD's large distribution network. Would not be surprised to see them build a stake in a2 over time...

[Bikeguy]

Bang on, this will be truly transformational for a2 with BD's large distribution network. Would not be surprised to see them build a stake in a2 over time...

Well said, It really would be transformational to the futures of both of these companies wouldn’t it,
Bright and A2 are seriously impressive companies in their own right…and when combined complete a exceptional product to market relationship that delivers value in every area, from the quality of the product through to the food security desires of China, and was making all involved some serious coin.
No one is going to be throwing that away, neither Bright nor A2, sure A2 can go to another manufacturer but we all know it’s not actually that easy and gives them no where near the access to market security Bright does, and China loves and wants the quality and security of the A2 product.
These two companies combined make an extremely profitable value proposition, do not kid yourselves in any way they both don’t know this.
I feel this company is going to be taken over by Bright, most probably in a JV with A2, at an offer somewhere between 1.80 - 2.20 (NZ) and it will be fantastic news for A2, production security, market access, profit sharing with their own supplier…all this agro between these two is just negotiating, smoke and mirrors while they sort the final ownership structure and future profit split

[aperitif]

Yes, they have the existing China State Farm agreement which has been and continues to be incredibly important. Forming an alliance/JV would put a2 in an incredibly strong position both from a manufacturing/distribution/market access standpoint, but also remove the "China rhetoric" somewhat. Having two state owned entities along for the ride;no tariffs and recent news on the "IF co operation agreement" to essentially share expertise, knowledge/experience and strengthen ties confirms this.

The IF industry in China is still far too fragmented, leading to all sorts of problems. Consolidation is happening from both in brand and manufacturing, BD know this and want a horse in the race. You only have to look at the US market where there are only three players with over 95% of the market; makes a lot more more sense from a regulatory/consumer and competitive point of view not to mention the ongoing trade up premium brands and a2 wave!

[Bikeguy]

Yes, they have the existing China State Farm agreement which has been and continues to be incredibly important. Forming an alliance/JV would put a2 in an incredibly strong position both from a manufacturing/distribution/market access standpoint, but also remove the "China rhetoric" somewhat. Having two state owned entities along for the ride;no tariffs and recent news on the "IF co operation agreement" to essentially share expertise, knowledge/experience and strengthen ties confirms this.

The IF industry in China is still far too fragmented, leading to all sorts of problems. Consolidation is happening from both in brand and manufacturing, BD know this and want a horse in the race. You only have to look at the US market where there are only three players with over 95% of the market; makes a lot more more sense from a regulatory/consumer and competitive point of view not to mention the ongoing trade up premium brands and a2 wave!

Well said,

[whatsup]

Zero doubt that the bond interest will get paid tomorrow.

Is there any update regarding this ?

[blackcap]

Is there any update regarding this ?

Well obviously if they did not pay the bond interest, the company would have to inform the exchange that they have not paid, and most likely would have to announce that they are in some kind of receivership/liquidation. These things have not happened, so I am 100% certain that bond interest has been paid.

[Newman]

Well said, It really would be transformational to the futures of both of these companies wouldn’t it,
Bright and A2 are seriously impressive companies in their own right…and when combined complete a exceptional product to market relationship that delivers value in every area, from the quality of the product through to the food security desires of China, and was making all involved some serious coin.
No one is going to be throwing that away, neither Bright nor A2, sure A2 can go to another manufacturer but we all know it’s not actually that easy and gives them no where near the access to market security Bright does, and China loves and wants the quality and security of the A2 product.
These two companies combined make an extremely profitable value proposition, do not kid yourselves in any way they both don’t know this.
I feel this company is going to be taken over by Bright, most probably in a JV with A2, at an offer somewhere between 1.80 - 2.20 (NZ) and it will be fantastic news for A2, production security, market access, profit sharing with their own supplier…all this agro between these two is just negotiating, smoke and mirrors while they sort the final ownership structure and future profit split

It seems that Bright Dairy and a2 Milk cannot reach an agreement before July 15, the due date for Synlait to pay banks $130 m. When you can legally get something for $1, you would not donate $2 for it. If the share price is kept for trading by July 15, it would be 10 cents. By that time, it would be much easier for Bright and a2 to reach an agreement: paying bank debts back and leaving 10 cents to shareholders.

[Rawz]

….
I feel this company is going to be taken over by Bright, most probably in a JV with A2, at an offer somewhere between 1.80 - 2.20 (NZ) and it will be fantastic news for A2, production security, market access, profit sharing with their own supplier…all this agro between these two is just negotiating, smoke and mirrors while they sort the final ownership structure and future profit split
Take over at $1.80-$2.20???? You’re dreaming mate

‘Tell him he’s dreaming’

[Marilyn Munroe]

Is there any update regarding this ?

Recievied the payment notice by email yesterday.

Boop boop de do
Marilyn

[Bikeguy]

Take over at $1.80-$2.20???? You’re dreaming mate

‘Tell him he’s dreaming’

Laughing, the world needs more dreamers too surely 😅

[Bikeguy]

Question, does anyone know if Peno has sold his shares?

[Newman]

Question, does anyone know if Peno has sold his shares?
H

A good question!

When he left the board, he said he was still a co-founder and shareholder. In exchange for leaving the board, he would be guaranteed his interest.

[Bikeguy]

H

A good question!

When he left the board, he said he was still a co-founder and shareholder. In exchange for leaving the board, he would be guaranteed his interest. is

I asked the same question on HotCopper and a poster said “ Still showing as holding 5,109,803 shares or 2.34%”
and that’s my understanding too…
I respect my thoughts and opinions are just that, and I am not in anyway connected to the board or in the know about what’s going on around the SML table…
But let’s consider something, Peno was until very recently, very very connected and was I am sure a part of enough discussions or knowledge even if he was kept on the outer…
This guy is holding a decent parcel of shares…why?
Why hasn’t he sold? This process with SML has been going on for a while, and he has since left SML (or been ousted pretty much) so it would be fair to say he of all people should have sold right? Why would you sit back and take such a huge loss, 5 mil shares…unless he knows something we don’t?

[Baa_Baa]

is

I asked the same question on HotCopper and a poster said “ Still showing as holding 5,109,803 shares or 2.34%”
and that’s my understanding too…
I respect my thoughts and opinions are just that, and I am not in anyway connected to the board or in the know about what’s going on around the SML table…
But let’s consider something, Peno was until very recently, very very connected and was I am sure a part of enough discussions or knowledge even if he was kept on the outer…
This guy is holding a decent parcel of shares…why?
Why hasn’t he sold? This process with SML has been going on for a while, and he has since left SML (or been ousted pretty much) so it would be fair to say he of all people should have sold right? Why would you sit back and take such a huge loss, 5 mil shares…unless he knows something we don’t?

I wouldn't read anything into it except that his shareholding (value) has been absolutely gutted, and it's irrelevant now to him how much of that was his own making. It would make no sense at all to sell out, at cents on the dollar, a massive eyewatering downside when potentially this whole thing has a recovery and he can still, one day, reap the upside. It's probably hobson's choice, hope for an upside by holding, or lose almost everything by selling now.

What would you do in his circumstance, now?

[Newman]

is

I asked the same question on HotCopper and a poster said “ Still showing as holding 5,109,803 shares or 2.34%”
and that’s my understanding too…
I respect my thoughts and opinions are just that, and I am not in anyway connected to the board or in the know about what’s going on around the SML table…
But let’s consider something, Peno was until very recently, very very connected and was I am sure a part of enough discussions or knowledge even if he was kept on the outer…
This guy is holding a decent parcel of shares…why?
Why hasn’t he sold? This process with SML has been going on for a while, and he has since left SML (or been ousted pretty much) so it would be fair to say he of all people should have sold right? Why would you sit back and take such a huge loss, 5 mil shares…unless he knows something we don’t?

If Dr. Peno were really smart, he would have sold some of his shares when the price was over $10, and the Pokeno problem would not have been created.

I think there is no requirement for him to report if his shares were sold, as his shareholding is less than 5%, except for Bright or A2m buying his shares.

Anyway, his 5 m shares would be realized at a good price, for example, when Bright is slightly short of the 90% threshold for a compulsory takeover. There will be no restriction on the price Bright pays for his shares.

[billkiapi]

It could be he has borrowed against the shares- can’t sell em now, the banks will be calling

[Newman]

Panic sellers of SML010 bonds have vanished, and the share price seems stabilized.

[Toddy]

Market stabilised at $63m market cap. So the market still thinks there is some value here. Today, anyway.

[Balance]

Panic sellers of SML010 bonds have vanished, and the share price seems stabilized.

By definition, the majority of bond and fixed interest investors invest for income so capital preservation is paramount. Cannot fault them for selling out to preserve what’s left of their capital. And most of them rely on the advice of brokers/advisors who are dark on the prospects of SML.

[Lego_Man]

By definition, the majority of bond and fixed interest investors invest for income so capital preservation is paramount. Cannot fault them for selling out to preserve what’s left of their capital. And most of them rely on the advice of brokers/advisors who are dark on the prospects of SML.

To be honest, it's the illiquidity prospects that will be spooking advisors rather than return of capital.

In receivership, likely investors will get all money back but it might take 2 years. That = grumpy clients.

[Toddy]

By definition, the majority of bond and fixed interest investors invest for income so capital preservation is paramount. Cannot fault them for selling out to preserve what’s left of their capital. And most of them rely on the advice of brokers/advisors who are dark on the prospects of SML.

And most shareholders would have concluded it's not worth selling anymore and take the long odds of the sp doubling from here when the magic fairy dust comes out. Anyone preserving their capital would be well and truly gone.

Double down, the Blues and Synlait. TAB should be all over this combo.

[Balance]

To be honest, it's the illiquidity prospects that will be spooking advisors rather than return of capital.

In receivership, likely investors will get all money back but it might take 2 years. That = grumpy clients.

2 years or 3 years to get their money back is nothing compared to the 40%+ bath that bond holders had been taking selling out in recent times.

[Bikeguy]

It could be he has borrowed against the shares- can’t sell em now, the banks will be calling

Yes, that’s a fair point, and could very well be the case.

I just can’t help thinking that the guy would be like anyone else, if it was actually as bad as it looks from the outside, and let’s face it he would have some knowledge of the reality, then surely you would sell out?
It doesn’t appear he has…

[Bikeguy]

And most shareholders would have concluded it's not worth selling anymore and take the long odds of the sp doubling from here when the magic fairy dust comes out. Anyone preserving their capital would be well and truly gone.

Double down, the Blues and Synlait. TAB should be all over this combo.

I think your on the money, it’s not worth selling now, may as well let it ride…best of luck to all.

[Valuegrowth]

It's not too low to sell and not too high to buy stocks entirely depend on the fudementals, value and growth. In the past I couldn't sell it's not too low to sell type stocks.

[billkiapi]

I think he'll be sued by someone anyway- so selling is either impossible because he borrowed against the shares or it's such a red flag that lawyers have said no way.

[Balance]

I think he'll be sued by someone anyway- so selling is either impossible because he borrowed against the shares or it's such a red flag that lawyers have said no way.

John Penno imo would not have resigned unless he has received some assurances about what is going to happen with Synlait - his 5.1m remaining shares were at one time worth $60m. He did however sell over 1m shares back in 2018 for $10.80 per share so he probably does not feel all that aggrieved.

Guess he had faith in the company not to have sold more at the time but that's life.

[Rawz]

John Penno imo would not have resigned unless he has received some assurances about what is going to happen with Synlait - his 5.1m remaining shares were at one time worth $60m. He did however sell over 1m shares back in 2018 for $10.80 per share so he probably does not feel all that aggrieved.

Guess he had faith in the company not to have sold more at the time but that's life.

Once worth $60m. Guttered....

[Bikeguy]

[QUOTE=Rawz;1057553]Once worth $60m. Guttered....[/QUOTE

Yes, that “shoulda, woulda, coulda moment would way heavy on anyone for sure…

[billkiapi]

I think that was for the ex wife?

[Rawz]

I think that was for the ex wife?

oh dear it just gets worse and worse :(

[Bikeguy]

I think that was for the ex wife?

So effectively hasn’t banked anything from these shares?? Feck

[Balance]

I think that was for the ex wife?

Freaking heck! Life can be such a bitch sometimes!