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The troubled Canterbury milk processor Synlait has unveiled a recapitalisation plan, offering new shares worth nearly $218 million to its two largest shareholders.
Under the deal, Bright Dairy of China, which currently owns 39% of Synlait, will end up owning almost two-thirds of the listed company. The a2 Milk Company (a2MC) will retain its 19.83% stake. Capital raised will be used to reduce debt.
The recapitalisation will require approval at a special shareholders meeting scheduled for September 18 at Synlait's Dunsandel factory.
Synlait chair George Adams told Rural News that he has held several meetings with farmers, most of whom have handed in cessation notices as the company struggles with financial problems.
Adams says farmers told him that they like doing business with Synlait but are unhappy because the company failed to meet market advance rates and they're concerned over its financial woes.
Adams says should the package plan be approved next month, the company's balance sheet would be restored. He says Synlait is already meeting market advance rates this season.
"So, we are doing those two things and hope that farmers will reconsider their position," he says.
Synlait has around 300 farmer suppliers, supplying its factories in Dunsandel and Pokeno.
Adams says the equity raise is critical for Synlait's future.
"We followed a rigorous process, which included taking independent expert advice, to consider a range of options under the circumstances Synlait is facing," he says.
"If the resolutions are not passed, it's likely Synlait would need to cease trading and initiate a formal insolvency process. We are particularly grateful for the continued support of our two major shareholders, Bright Dairy and The a2 Milk Company. Their investment demonstrates their deep commitment to Synlait's future," says Adams.
