May 23, 2017 / 2:53 PM / a year ago

JBS shares extend slide as Brazil plea bargain impact stirs funding worries

SAO PAULO, May 23 (Reuters) - JBS SA shares skidded as much as 10 percent, bringing the scandal-tainted Brazilian meatpacker’s nosedive over the past five days to 46 percent, on growing concern about the impact of a plea bargain by its owners on the company’s finances.

Fitch late on Monday cut its rating on JBS debt to BB from BB+, citing the magnitude of the deal signed with prosecutors by brothers Joesley and Wesley Batista and its potential impact on funding sources.

The Fitch move followed a similar one by Moody’s earlier on Monday.

The downgrades sparked a fresh round of selling in JBS shares which is likely to extend in the short term, said Coinvalores brokerage head of equities trading Marco Tulli Siqueira.

“The selloff may be overstretched in terms of fundamentals but right now the market is in panic mode,” he said. “That will not change until the scandal dies down.”

JBS shares later trimmed losses to 8.4 percent to 5.48 reais, still their lowest level in 47 months.

In a related development, newspaper O Estado de S. Paulo reported on Tuesday that Banco Original SA, a mid-sized bank owned by J&F Investimentos, which controls JBS, will be monitored on-site by a central bank auditor starting on Tuesday.

The measure was taken preemptively by the central bank, the newspaper said, citing a source with knowledge of regulatory practices, and does not mean an intervention at the lender.

The Batista brothers, who have built J&F into a sprawling conglomerate, have admitted to bribing politicians in a case that has sparked calls for the resignation of Brazilian President Michel Temer.

The central bank declined to comment. A Banco Original spokesperson did not have an immediate comment. (Reporting by Alberto Alerigi Jr. and Bruno Federowski; Writing by Silvio Cascione; Editing by Christian Plumb and W Simon)

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