Synlait Milk secures new $450m banking facility

Synlait Milk has refinanced its banking facilities.

Synlait Milk has refinanced its banking facilities for another year.

Its new funding arrangements total $450 million and include a working capital facility with a peak of $160m and a $10m on-demand bilateral facility, a revolving credit facility of $205m and a term loan facility of $75m.

Synlait’s new banking syndicate will include ANZ, Bank of China, Bank of Communications, China Construction Bank, HSBC, Industrial and Commercial Bank of China, Kiwibank and Rabobank.

The new facilities, except for the on-demand bilateral facility, mature 12 months from the closing date, expected to be October 1 this year.

The covenants include a net leverage ratio of 2.5x for the 2025 financial year, which only applied on senior debt to earnings before interest, taxes, depreciation and amortisation (ebitda) and applies at balance date.

It has a working capital ratio of 1.2x from August 1, 2024, and March 31, 2025, and 1.5 from April 1 to July 31 next year.

It also has an interest cover ratio of 2.5x for the financial year.

That applies quarterly and is based on actual ebitda for the completed applicable period and forecast for the remaining part of the financial year.

Shareholders’ funds always have to exceed $500m.

The new facilities will replace its existing ones and be in addition to a $130m shareholder loan.

The refinancing, which had been signalled, has several conditions, including the upcoming capital raise.

Shareholders will gather at Synlait’s Dunsandel site on Wednesday to vote on a proposed $218m capital raise from its two largest shareholders, Bright Dairy and The a2 Milk Company, to allow the company to deleverage its debt-laden balance sheet.

Chief executive Grant Watson said the refinancing was another positive step forward in Synlait’s business recovery plan and actions to deleverage the company.

“We are pleased to provide certainty around our bank refinancing plans for our shareholders, customers, suppliers and staff ahead of this week’s special shareholders’ meeting.”

Proceeds from the equity raise and certain tranches of the new facilities will be used to repay outstanding bank debt and its $180m listed bond.