Shares of Synlait Milk (ASX:SM1) jumped 52% after shareholders approved the first tier of a confusing refinancing of the troubled company’s debt and financials.
The stock jumped to a daily high of 38 cents before returning to around 34 cents after the shareholders’ meeting at a special meeting in New Zealand approved a $130 million loan deal. Zealand with the main Chinese shareholder, Bright Dairy.
The approval prevented the company from taking control early next week because Synlait didn’t have enough budget to repay the loan as its banks had demanded.
Shareholder approval of the loan agreement is mandatory because it is a similar party transaction with a major shareholder. This seemed in doubt earlier this week, when the second largest shareholder, a2 Milk, was slow to reveal how it would vote for its 19. 9%.
The two corporations have fallen out over an agreement Synlait entered into with a2, which is being terminated due to poor performance and other issues.
a2 revealed to the assembly that he would vote in favor of the Bright Dairy loan. This contributed to the increase in stocks and the approval gave new impetus.
The cash will be used to pay off a bank loan for the same amount that is due next Monday.
This will reduce debt, which stood at NZ$585 million at the end of May.
Synlait shareholders now have another meeting due later this year on the terms of a proposed retail factor and the refinancing of NZ$180 million of bank debt. Both deserve to be carried out at the same time.
The terms and amount of the factor will be announced early next month, with a new shareholders’ meeting in late August or early September, and the 2023-24 annual effects will be released at the end of the month. These numbers are not good.
Outlining Synlait’s long-term on Thursday, chairman George Adams said its purpose would be to raise capital over the next two months, but that it would be tricky as it seeks to raise capital equivalent to several times its current market price (about A$57 million). ).
Adams told Thursday’s meeting that the company is still reviewing its North Island operations, adding the future of its Pkeno plant, which will produce plant-based milks.
Synlait had tried unsuccessfully to sell the business of its client Dairyworks, owner of the Alpine and Rolling Meadow cheese brands, but ended the procedure after failing to obtain high enough offers.
He said Synlait would work between companies and its food service business, with its premium dairy products such as infant formulas.
Adams said a priority would be to check relations with a2 Milk.
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