Synlait Milk’s largest shareholder, Bright Dairy, has agreed to provide a NZ$130 million (all subsequent $ are NZ$) shareholder loan, subject to shareholder approval, as Synlait reveals it is unlikely to meet three of its banking covenants by 31 July.
In April, Synlait had a small reprieve with a two-month extension to repay $130 million that was due on 28 March.
The company said it will draw down the full amount to meet its prepayment obligation to the company’s senior lenders, which is due on 15 July.
Synlait chair, George Adams, said: “We are grateful for the support from Bright Dairy. We are actively working with Bright Dairy on the remaining work relating to this shareholder loan and a future equity raise. The shareholder loan, and the future equity raise, will enable Synlait to reduce its debt to a sustainable level.”
The drawdown of the loan is conditional on Bright Dairy securing the necessary corporate, shareholder, and external approvals, and meeting drawdown conditions and consent of Synlait’s banking syndicate (including subordination terms).
The loan also requires approval from Synlait’s shareholders other than Bright.
It said the unlikelihood of meet three of its banking covenants – the interest coverage ratio, leverage ratio, and senior leverage ratio – reflected the timing of its deleveraging and further weakening of its financial performance.
The banking syndicate are reviewing a package of proposed waivers put forward by Synlait.
And its attempt to sell its high-value business, Dairyworks, was unsuccessful, with the cheese company now officially closed to offers. Synlait said it had received interest but offers were not at an acceptable level.
