Marfrig bonds rally on Moy Park sale to rival JBS
NEW YORK, June 22 (IFR) - Bonds issued by Brazilian beef producer Marfrig were enjoying a five-point rally on Monday as investors cheered the deleveraging potential behind its sale of UK subsidiary Moy Park.
The company's bonds leapt this morning after Marfig announced late Sunday that it would sell Moy Park to its larger rival JBS in a transaction valued at US$1.5bn comprising a cash payment of US$1.19bn and GBP200m of net debt.
The sale is seen as credit positive as it will allow the company to deleverage further and eliminate the uncertainty over how Marfrig would monetize an asset that it had been expected to spin-off.
"If Marfrig was going to maintain a majority (stake) in Moy Park, it wouldn't have been able to raise enough to lower leverage (substantially)," said Omar Zeolla, a corporate analyst at Oppenheimer & Co. Inc.
Gross debt following the sale is expected to drop to R$8.321bn from R$13.4bn, cutting net debt to approximately R$5.7bn, the company said in a presentation to investors.
The idea is to improve free cash flow, which will be used to increase Brazilian beef exports and accelerate growth opportunities in the US and Asia.
Net debt to Ebitda jumped from three times in 2013 to five times by the end of last year, but Fitch expects that to drop to 4-4.5 times by the end of 2015.
While JBS's recently issued 2025s were down about a point in the morning at around 98.50 mid-market, many see the deal as a win-win situation for both parties.
"Marfrig is getting a good price, but JBS has an ability to turn acquisitions around quickly and people had been worried that they might do a much bigger acquisition," said a senior banker. Continuación...