Fitch Rates Marfrig's Proposed US$300MM Note Issuance 'B+/RR4'; Outlook Negative

  Fitch Rates Marfrig's Proposed US$300MM Note Issuance 'B+/RR4'; Outlook
  Negative

Business Wire

NEW YORK -- January 9, 2013

Fitch Ratings has assigned an expected rating of 'B+/RR4' rating to Marfrig's
proposed USD300 million senior unsecured notes due 2017 to be issued by
Marfrig Holdings (Europe) BV. These notes will be unconditionally guaranteed
by Marfrig Alimentos S.A. (Marfrig), Marfrig Overseas Ltd and several other
subsidiaries. Proceeds are expected to be used to refinance debt maturities
and extend debt maturity schedule. A complete list of Fitch's ratings of
Marfrig is at the bottom of the press release.

The 'B+' rating takes into consideration the company's aggressive growth
strategy and high leverage. Further considered in the rating is the volatility
of protein prices and profit margins due to factors beyond the company's
control. Positive considerations include Marfrig's strong business position as
one of the largest producers and exporters of beef, poultry, and pork in
Brazil.

Ratings Drivers:

The Rating Outlook for Marfrig and its rated subsidiaries is Negative. A
revision of the Outlook to Stable could be triggered by a number of factors
that could include financial improvements which are better than expected given
the current operating environment, and/or sufficient capital injections to
meaningfully reduce debt. A rating downgrade could be precipitated by a
further deterioration in company's credit metrics, negative cash flow
generation or liquidity concerns.

Fitch views positively the BRL 1 billion equity issuance concluded by the
company during October 2012. Along with the current bond issuance this will
strengthen liquidity and improve the company's amortization schedule. In
Fitch's opinion, the funds raised will be sufficient to address an estimated
BRL1.2 billion of debt maturities (other than trade debt) through 2013. Fitch
projects that Marfrig's free cash flow generation will be negative in 2013,
which will continue to make the company dependent upon external financing, as
it faces debt maturities during 2014 of BRL2.8 billion. Additional challenges
faced by the company include: integrating the assets acquired in an asset swap
with Brazil Foods (BRF), retaining the market share of the brands it received,
and the successful launch of a large number of new products in a bid to
capture additional market share.

Leverage Remains High Despite Recent Equity Issuance:

As of Sept. 30, 2012, Marfrig had BRL 12.9 billion of debt and BRL 2.8 billion
of cash and marketable securities. During the LTM ended Sept. 30, 2012, the
company generated BRL 1.9 billion of EBITDA. Fitch estimates that Marfrig's
gross and net debt-to-LTM EBITDA ratios pro forma the equity issuance for the
period ended Sept. 30, 2012 were 6.1x and 4.6x, respectively. These ratios
compare with 6.8x and 4.8x during 2011. Fitch expects that Marfrig's leverage
ratios will remain relatively high through 2013.

Earnings Volatility:

Protein prices and demand are volatile. Marfrig's profit margins are affected
by factors beyond the company's control. These include domestic and
international supply and demand imbalances resulting from animal disease and
weather conditions, global economic growth, changes in consumption habits, and
government-imposed sanitary and trade restrictions. Competitive pressures from
other players also affect the company's margins.

Strong Business Position:

Marfrig is one of Brazil's largest producers and exporters of beef, poultry,
and pork. The company has a more diversified business profile than most of its
peers. Its production base is diversified and 35% of its sales are from
exports. A little over one-third of its revenues come from higher value-added
processed food. As a result of the recent asset swap with BRF, processed and
prepared product capacities will more than double.

Processed Food - Long-Term Positive, Short-Term Volatility:

Marfrig's strategy of reducing commodity protein exposure by increasing its
share in processed food, which is less volatile and commands better profit
margins, is a credit positive. The asset swap with BRF will strengthen
Marfrig's competitive position in the value-added protein products market and
is consistent with the company's previous acquisitions. Achieving full
capacity will take time and the company's efficiency may decline during the
integration period which will pressure margins.

Fitch currently rates Marfrig as follows:

Marfrig Alimentos S.A.

--Local currency IDR at 'B+';

--Foreign currency IDR at 'B+';

--National scale rating at 'BBB+(bra)';

--BRL 300 million 3rd debentures issue (1st tranche) at 'BBB+(bra)';

--BRL 300 million 3rd debentures issue (2nd tranche) at 'BBB+(bra)'.

Marfrig Overseas Ltd

--Foreign currency IDR at 'B+';

--US$375 million senior unsecured notes due 2016 at 'B+/RR4';

--US$500 million senior unsecured notes due 2020 at 'B+/RR4'.

Marfrig Holdings (Europe) B.V.

--Foreign currency Marfrig Alimentos S.A.

--Local currency IDR at 'B+';

--Foreign currency IDR at 'B+';

--National scale rating at 'BBB+(bra)';

--BRL 300 million 3rd debentures issue (1st tranche) at 'BBB+(bra)';

--BRL 300 million 3rd debentures issue (2nd tranche) at 'BBB+(bra)'.

The Rating Outlook for Marfrig Alimentos S.A., Marfrig Overseas Ltd, and
Marfrig Holdings (Europe) B.V. is Negative. The ratings of these companies are
linked by Fitch Parent and Subsidiary Linkage criteria.

Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 13, 2010);

--'Parent and Subsidiary Rating Linkage' (July 14, 2010).

Applicable Criteria and Related Research:

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685552

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

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