LatinFinance - July/August 2014 - 28

That opportunistic approach is one
Quiroz says the firm has taken with its US
acquisitions, and the same approach will
continue now. "The bread business in the
US was consolidating," says Quiroz, looking
back over the firm's growth over the past
ten years.
"Opportunities arise. It is difficult to
make decisions years in advance that you
want to be 'x' or 'y'."
In the same way, over the coming years,
Quiroz says the firm does not "foresee any
large acquisitions". "We have to take time
to digest what we've acquired," he says.
But even now, he does not dismiss the
possibility of further inorganic growth.
"We are always open to considering
anything that comes," he says. LF

BRAZILIAN CORPORATE WITH THE
BEST CAPITAL MARKETS STRATEGY

JBS

Taking refinancing chances
when they arise has kept
debt costs under control
amid hefty acquisitions

CUTTING OFF DEBT: Brazilian beef firm
JBS reduced its leverage from 4.03 times
ebitda to 3.26 times between the third
quarter of 2013 and first quarter of 2014

©REUTERS

When JBS agreed to buy the Seara poultry
and pork unit in Brazil from Marfrig in
June 2013, it took on a huge debt pile.
A month earlier, it had agreed to buy a
similar operation for 200 million reais ($90
million) from Brasil Foods.
Seara saw JBS assuming 5.85 billion reais

($2.73 billion) of debt.
Yet the company has since done a
number of transactions to get its debt under
control. That includes two new bond sales,
a reopening and a tender offer.
JBS and its competitors - including
Marfrig and Brasil Foods - have all made
efforts to take advantage of low yields on
offer in the bonds markets, to refinance
debt. But it is JBS's persistence in the
bond markets and its aggressive leverage
reduction that has earned it this award for
the year to 31 March 2014.
"They have been more proactive," says
Erick Rodrigues, a Brazil-based analyst at
credit agency Moody's, speaking about
firm's strategy to manage its debt burden via
the capital markets. "They acquired assets
from Marfrig, but even so they were able to
manage their leverage."
The company's leverage rose to 4.03
times Ebitda in the third quarter of 2013 -
only three months earlier it had been 3.28
times. Yet the firm quickly pulled that under
control. By the end of the first quarter of
2014, the company's debt was down to 3.26
times Ebitda.
"They assumed new debt, but with the
depreciation of the real and with liability
management exercises, they were able to
maintain their leverage. It was proactive -

28 LATINFINANCE.COM - July/August 2014

but it came after they assumed the debt,"
says Rodrigues.
In April 2013, just weeks after being
upgraded by Moody's to Ba3, JBS tapped
its 2023 bond, adding $275 million at a
6.25% yield.
In September, it returned to the market
with a liability management exercise.
The USA unit reopened a 7.25% 2021
bond, adding $500 million to buy back its
11.625% 2014 note.
It was back again in October, selling a
2020 bond, callable from 2018. The deal
was the firm's largest-ever in the crossborder market: demand totaling $5 billion
pushed the company to issue a $1 billion
transaction. JBS was also able to tighten
pricing on the deal, which offered a 7.75%
yield at reoffer - after the deal was first
indicated at above 8%.
Its efforts in the capital markets
increased the ratio of local currency
funding in its liability structure, and cut
the average cost of debt by 117 basis points,
to 5.78% at the end of the first quarter.
Yet, since the awards period closed
on March 31, 2014, it has not been plain
sailing for the meat and convenience food
company.
Pilgrim's Pride, a US company of
which JBS owns 75%, came out with a
big surprise in May: a $6.4 billion bid for
rival food producer Hillshire Brands. JBS
said the deal fitted its strategy to expand
in the value-added convenience food
sector - yet shareholders expressed
their disinterest in the deal, as the
stock price fell 4.18% on the day of the
announcement.
The situation got messier when a
rival bid came in from Tyson Foods for
Hillshire. JBS USA abruptly postponed a
bond transaction slated for the same day,
saying it needed to find a new bookrunner.
Market talk suggested Morgan Stanley was
dropped as a lead manager because its
investment banking division was advising
Tyson. The bank declined to comment.
Ultimately, Tyson outbid Pilgrim.
Although it was not clear whether the rival
bid would ultimately be accepted, the JBS
subsidiary withdrew its final $7.7 billion
bid for the asset. JBS USA managed to
revive its bond in mid-June, with Bank of
America Merrill Lynch, Barclays and Wells
Fargo arranging.
The deal proceeded smoothly: JBS USA
notched up the lowest-ever coupon for
one of the group's companies, of 5.875%,
for the $750m 2024 bond. The company
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