Synlait shares surge as A2 Milk backs approval of $120m loan
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More news: Shares in Synlait Milk rocketed on the ASX after securing backing from shareholder A2 Milk for a new loan by China's Bright Dairy.
Synlait shares climbed 52.2% to $0.35, before entering a trading halt at 11:30am AEST.
The dual-listed company is holding a special shareholder meeting today to approve a NZ$130 million ($120 million) loan from shareholder Bright Dairy, that will be used to repay an existing loan of NZ$130 million due to banks by 15 July.
Synlait secures A2 Milk backing for crucial debt vote
The news: Embattled New Zealand dairy producer Synlait Milk has secured backing from key shareholder A2 Milk for a new loan by China’s Bright Dairy.
The numbers: NZX- and ASX-listed Synlait will hold a special shareholder meeting later on Thursday to approve a NZD130 million ($120 million) loan being made available by top shareholder Bright Dairy. That will be used to repay an existing loan of NZD130 million due to banks by 15 July.
Synlait will require a simple majority of shareholders other than Bright Dairy to approve the resolution at the meeting.
The context: A2 Milk, which is Synlait’s top customer and also holds a nearly 20% stake in the company, said it had been in discussions over its rival’s recapitalisation plans, among other matters.
Synlait had earlier warned it could be forced to cease trading or initiate a formal insolvency process if the NZD130 million bank repayment is not made.
The dual-listed company reported a hefty first-half loss and has previously warned of material uncertainties after heavy writedowns amid a slow recovery in business performance. Relations with A2 Milk also worsened due to an ongoing dispute about Synlait’s exclusivity rights on supply of certain types of infant milk formula products.
What they said: A2 Milk said in a statement that it "continues to have concerns and will engage in discussions with Synlait in the coming weeks."
"In the meantime, the company confirms that it has advised Synlait that it will vote in favour of today’s resolution," it said.
The source: ASX
