A2 Milk Co Ltd (ASX: A2M) shares are in the green today.

Shares in the S&P/ASX 200 Index (ASX: XJO) dairy stock closed yesterday trading for $6.82. In morning trade on Thursday, shares are swapping hands for $6.88, up 0.8%.

For some context, the ASX 200 is up 0.9% at this same time.

This comes after the company released an update on its voting intentions at today’s special Synlait Milk Ltd (ASX: SM1) shareholders’ meeting. That’s taking place at 2pm today, New Zealand time.

Here’s what’s happening.

A2 Milk shares in the green ahead of Synlait loan vote

A2 Milk shares are marching higher after the company said it has been in discussion with Synlait regarding the junior dairy stock’s recapitalisation plan. That plan includes a $130 million shareholder loan as well as Synlait’s proposed equity raising and concurrent refinancing of its bank facilities.

 A2 Milk said it “continues to have concerns and will engage in discussions with Synlait in the coming weeks”.

However, management confirmed that it would vote in favour of today’s resolution.

The Synlait Milk share price is going ballistic on the news, up a whopping 50% to 34.5 cents.

If you own A2 Milk shares, you also own a slice of Synlait. A2 Milk holds almost 20% of Synlait shares.

If shareholders vote in favour today, Synlait will receive the $130 million loan from Bright Dairy, which owns around 39% of Synlait shares. Bright Dairy is not allowed to vote on the proposal under New Zealand trading rules.

Synlait said if the resolution received the green light today, it would draw down the entire loan to meet its $130 million bank payment, due on 15 July.

On 25 June, Synlait chair George Adams said, “Synlait is now progressing at pace a series of structural initiatives to address the scale of challenges we face today.”

Adams added:

We are committed to resetting Synlait’s balance sheet, with the support of Bright Dairy, to ensure we return to a position where we can deliver the growth potential we see in our core Advanced Nutrition and Foodservice businesses.

Bright Dairy director Julia Zhu said, “We are deeply committed to Synlait, believing its assets and operations to offer significant value and opportunity within regional and global dairy markets.”

Zhu continued:

This $130 million shareholder loan facility is one part of Bright’s wider support to see Synlait return to a much stronger financial and operating position, as early as practicable in this economic cycle.”

With today’s intraday gains factored in, A2 Milk shares are up 37% over 12 months.

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