Synlait Milk has successfully agreed debt refinancing with creditors, one of the pre-conditions to ensure the New Zealand-based dairy company’s survival.

Completion of the new banking facilities was also a conditional arrangement set forth by The A2 Milk Co. in August to finally settle a long-running contractual and pricing dispute with Synlait.

A proposed and successful equity raise of NZ$272m ($168.2m), in which A2 Milk has pledged to take part in as Synlait’s second-largest shareholder, is also another prerequisite of the August agreement.

Synlait’s shareholders are scheduled to vote on the equity raise at a special meeting on Wednesday (18 September). If approved, the arrangement with A2 Milk will become “unconditional” once the equity financing is completed, which is also a condition of the debt refinancing with the banking syndicate.

All issues are expected to conclude on 1 October for Synlait, which is based in Wellington and is listed on both the New Zealand and Australia stock exchanges.

CEO Grant Watson said in a filing with the two bourses today (16 September): “The new bank refinancing is another positive step forward in Synlait’s business recovery plan and actions to deleverage our 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.”

China’s Bright Dairy will increase its stake in Synlait from 39% to 65.3% by taking part in the equity raise, solidifying its position as the company largest shareholder ahead of A2 Milk.

Bright Dairy has already provided Synlait with a NZ$130m bailout loan to prop up the business and help ensure its survival as a going entity.

The new debt facilities will replace existing bank facilities and are in addition to the Bright Dairy loan, which the company said it drew in July.

Included in the banking arrangements are ANZ, Bank of China, Bank of Communications, China Construction Bank, HSBC, Industrial and Commercial Bank of China, Kiwibank, and Rabobank.

In total, the syndicate loans amount to NZ$450m, consisting of a working capital facility of NZ$160m, a revolving credit facility of NZ$205m, and a term loan of NZ$75m. An on-demand bilateral facility of NZ$10m, part of the working capital arrangement, makes up the numbers.

In addition to the new banking facilities, Synlait said it has NZ$180m of five-year unsecured, subordinated bonds outstanding.

“These are subject to bondholder early redemption rights triggered by the proposed equity raise being considered by shareholders at the special shareholder meeting,” Synlait said today.

“Proceeds from the equity raise and certain tranches of the new facilities will be used to repay the outstanding bank debt and the bonds.”