Synlait Secures NZ$50M Credit Boost Amid Manufacturing Cost Pressures
Synlait Milk Limited has temporarily expanded its banking facilities by NZ$50 million to manage ongoing cost impacts from earlier manufacturing challenges, while preparing to reduce debt through a major asset sale.
- Temporary NZ$50 million revolving credit facility added
- Manufacturing challenges from FY25 continue to affect FY26 costs
- Banking covenant EBITDA thresholds adjusted but compliance maintained
- Planned debt reduction via North Island asset sale expected by April 2026
- Majority shareholder Bright Dairy supports asset sale with postal vote
Synlait’s Banking Facilities Expansion
Synlait Milk Limited has announced a temporary increase in its banking facilities, introducing a new NZ$50 million revolving credit facility effective from 14 November 2025 through to 31 March 2026. This move is designed to provide additional working capital as the company navigates residual financial pressures stemming from manufacturing difficulties experienced earlier in the year.
Legacy Manufacturing Challenges and Cost Implications
While Synlait had initially planned for a lean working capital approach in the current financial year, the fallout from manufacturing challenges; specifically those at its Dunsandel facility; has complicated cash flow management. The company reported that these issues, which cost NZ$43.5 million in FY25, have largely been resolved. However, the financial impact continues to ripple into FY26, resulting in ongoing elevated expenses.
Adjustments to Banking Covenants
In response to the revised earnings outlook, Synlait has negotiated adjustments to the quarterly and annual minimum EBITDA thresholds within its banking covenants for FY26. Despite these changes, the company remains in full compliance with its financial obligations, signaling prudent management amid operational headwinds.
Strategic Debt Reduction via Asset Sale
Looking ahead, Synlait plans to significantly reduce its debt burden by utilising proceeds from the sale of its North Island assets. This transaction is expected to complete on 1 April 2026, subject to regulatory approvals and shareholder consent. Notably, majority shareholder Bright Dairy has already lodged a postal vote in favour, clearing a critical hurdle for the deal’s progression.
Investor Outlook and Next Steps
Synlait’s temporary credit facility and covenant adjustments reflect a pragmatic approach to managing short-term liquidity challenges while positioning for longer-term financial stability. The market will be watching closely for updates on the asset sale completion and the company’s ability to translate these financial maneuvers into sustained operational recovery.
Bottom Line?
Synlait’s credit boost and asset sale plan mark a pivotal step in stabilising finances amid lingering manufacturing cost pressures.
Questions in the middle?
- How will ongoing cost impacts from FY25 manufacturing issues affect Synlait’s profitability in FY26?
- What regulatory or shareholder risks could delay or derail the North Island asset sale?
- Will the adjusted EBITDA covenant thresholds remain sustainable if operational challenges persist?
