U.S. markets close in 4 hours 54 minutes
  • S&P 500

    3,636.99
    -82.05 (-2.21%)
     
  • Dow 30

    29,185.15
    -498.59 (-1.68%)
     
  • Nasdaq

    10,715.13
    -336.50 (-3.04%)
     
  • Russell 2000

    1,662.09
    -53.16 (-3.10%)
     
  • Crude Oil

    82.19
    +0.04 (+0.05%)
     
  • Gold

    1,661.00
    -9.00 (-0.54%)
     
  • Silver

    18.65
    -0.23 (-1.22%)
     
  • EUR/USD

    0.9765
    +0.0026 (+0.26%)
     
  • 10-Yr Bond

    3.7880
    +0.0830 (+2.24%)
     
  • GBP/USD

    1.1030
    +0.0144 (+1.32%)
     
  • USD/JPY

    144.6070
    +0.4850 (+0.34%)
     
  • BTC-USD

    19,212.01
    -174.10 (-0.90%)
     
  • CMC Crypto 200

    439.40
    -6.58 (-1.48%)
     
  • FTSE 100

    6,847.86
    -157.53 (-2.25%)
     
  • Nikkei 225

    26,422.05
    +248.07 (+0.95%)
     

JBS USA Lux S.A. -- Moody's assigns Baa3 rating to JBS USA proposed notes

·16 min read

Rating Action: Moody's assigns Baa3 rating to JBS USA proposed notesGlobal Credit Research - 19 Aug 2022New York, August 19, 2022 -- Moody's Investors Service ("Moody's") assigned a Baa3 rating to the proposed senior unsecured notes that will be co-issued by JBS USA Lux S.A. ("JBS USA"), along with wholly owned subsidiaries JBS USA Finance, Inc. ("JBS USA Finance") and JBS USA Food Company ("JBS USA Food") in exchange for existing notes issued by JBS USA Food Company (originally issued by JBS Finance Luxembourg S.à r.l.). The co-issuers are indirect wholly owned subsidiaries of Brazil-based JBS S.A. (JBS, Baa3 stable).The proposed notes will be guaranteed by JBS S.A., JBS USA Holding Lux S.à r.l. and certain other indirect parent companies of JBS USA and each of JBS USA's wholly-owned U.S. restricted subsidiaries that guarantee the senior secured term loan, excluding Pilgrim's Pride Corporation ("PPC", Ba3 stable).All the other ratings of JBS S.A., JBS USA and stable outlook remain unchanged.On 2 August JBS USA announced an exchange offer and consent solicitation for up to $2 billion of outstanding amounts for notes issued solely by JBS USA Food Company, including $1 billion in notes due in 2027 and $1 billion due in 2032. The transaction will have no effect on JBS USA credit metrics, as the proposed new notes would have identical economic terms, tenor and interest rates as those of the notes outstanding.The ratings of the proposed notes assume that the final transaction documents will not be materially different from draft legal documentation reviewed by Moody's to date and assume that these agreements are legally valid, binding and enforceable.Assignments:..Issuer: JBS USA Lux S.A..... proposed Gtd Senior Unsecured Notes due 2027, Assigned Baa3 (co-issued by JBS USA Food Company, JBS USA Finance, Inc.).... proposed Gtd Senior Unsecured Notes due 2032, Assigned Baa3 (co-issued by JBS USA Food Company, JBS USA Finance, Inc.)RATINGS RATIONALEBecause JBS USA debt instruments are guaranteed by its parent company JBS S.A., the company's ratings are driven primarily by JBS S.A. senior unsecured ratings. Thus, Moody's expects that future changes to the JBS USA debt instrument ratings and outlook will reflect any changes to JBS S.A. senior unsecured rating and outlook, respectively. The rating could also be affected by any changes in capital structure that result in material shifts in relative rights of payment, guarantees or collateral support with respect to debt instruments of JBS USA and JBS S.A.JBS USA has good liquidity to meet its financial obligations and capital spending requirements, with about $1.7 billion in cash (excluding $90 million in restricted cash) and $ 2.2 billion in revolving credit facilities at the end of June 2022, and free cash flow of $3.2 billion in the 12 months ending in June 2022. JBS USA is the main operating subsidiary of JBS S.A., generating about 75% of consolidated revenue and 90% of the consolidated EBITDA for the 12 months ended in June 2022.JBS S.A. credit profile continues to reflect the strength of its global operations as the world's largest protein producer; and its substantial diversification across protein segments, geographies, and markets, which resulted in more stability in operating margins and cash flow over time. It is constrained by the volatility in the protein industry, which is subject to risk factors such as weather conditions, diseases, supply imbalances and global trade variables.As for the environmental, social and governance (ESG) factors incorporated into JBS S.A. ratings, Moody's considered environmental risks mainly related to the company's exposure to carbon transition trends, natural capital and water management. The allegations of links of cattle raising to the deforestation of the Amazon and other biomes heightens social risks related to the exposure to responsible production, while corporate governance concerns due to concentrated shareholders structure continue to weigh on the company's credit profile.The stable outlook reflects Moody's expectation that JBS S.A. operational performance will remain strong and resilient in the next 12 to 18 months, and that the company will manage its M&A strategy and dividend payout without jeopardizing liquidity and maintaining leverage within the targets stated in its financial policies (2x-3x net debt/EBITDA). The stable outlook also contemplates the expectation that strong cash flow from operations will allow JBS to further reduce debt.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSAn upgrade to JBS USA debt instrument ratings would likely result from an upgrade of JBS S.A. senior unsecured rating. Conversely, a downgrade to JBS USA debt instrument ratings would likely result from a downgrade of JBS S.A. senior unsecured rating.An upgrade of JBS S.A. ratings would be subject to the overall earnings stability of JBS, sustained conservative financial policies, and continued evidence of enhanced risk control and governance oversight, with a track record of absence of event risks related to litigations and investigations involving the company and its controlling shareholders. An upward rating movement would also require JBS to generate positive free cash flows on a consistent basis and maintain strong liquidity and strong credit metrics, with leverage sustained at or below 2x and interest coverage (EBITA/interest expense) improving toward 7x.The ratings of JBS S.A. could be downgraded if the company's operating performance weakens, its financial policy becomes more aggressive, or its liquidity deteriorates. A downgrade could be triggered by events that can increase liquidity risk or cause reputation damage, including litigations and M&A. Quantitatively, a downgrade could also occur if the company's leverage (total debt/EBITDA) stays above 3x and cash flow from operations/debt stays below 25% on a sustained period.The principal methodology used in these ratings was Protein and Agriculture published in November 2021 and available at https://ratings.moodys.com/api/rmc-documents/356422. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.Headquartered in São Paulo, Brazil, JBS S.A. is the world's largest protein producer in terms of revenue, slaughter capacity and production. The company is the leader in beef, poultry and leather, and it is the second-largest pork producer in the US. The company has operations in more than 20 countries with more than 450 offices and plants, which support its large scale and diversification. In the twelve months ended June 2022, JBS S.A. reported consolidated revenue of BRL 372.9 billion ($71.1 billion), with a consolidated EBITDA margin of 12.7%. Headquartered in Greeley, Colorado, USA, JBS USA reported consolidate revenue of $53.2 billion in the same period.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating. Barbara Mattos, CFA Senior Vice President Corporate Finance Group JOURNALISTS: 0 800 891 2518 Client Service: 1 212 553 1653 Marcos Schmidt Associate Managing Director Corporate Finance Group JOURNALISTS: 0 800 891 2518 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements. ​