Fitch Affirms JBS's IDR and Notes Rating at 'BB-'; Outlook Revised to Stable

  Fitch Affirms JBS's IDR and Notes Rating at 'BB-'; Outlook Revised to Stable

Business Wire

NEW YORK -- October 22, 2013

Fitch Ratings has affirmed the foreign and local currency Issuer Default
Ratings (IDRs) of JBS S.A. (JBS) at 'BB-' as well as its 'A-(bra)' national
scale rating. Fitch has also affirmed at 'BB-' rating on the notes due in 2016
issued by JBS and the 'A-(bra)' rating of its debentures due in 2015. A
complete list of related rating actions is listed at the bottom of this press
release.

In conjunction with these rating actions, Fitch has also assigned an expected
rating of 'BB-' to a proposed benchmark-size senior unsecured notes offering
by JBS Investments GmbH (formerly ESAL GmbH), a wholly owned subsidiary of JBS
based in Austria. These notes will be unconditionally guaranteed by JBS and
JBS Hungary Holdings Kft. The proceeds are expected to be used to refinance
shorter-maturity indebtedness and for general corporate purposes.

Fitch has removed the ratings of JBS and its affiliates from Rating Watch
Negative and has assigned a Stable Rating Outlook to JBS.

These rating affirmations and the assignment of a Stable Outlook conclude the
review of JBS, which was placed on Rating Watch Negative during June 2013 as a
result of its acquisition of the Seara Brasil and Zenda leather businesses
from Marfrig Alimentos S.A. for BRL5.8 billion (USD2.6 billion). The ratings
build in an expectation that JBS's net leverage will organically improve to at
or below 3.0x by the end of 2014.

KEY RATING DRIVERS

HIGH LEVERAGE, BUT DELEVERAGING

Fitch expects JBS's net debt to EBITDA ratio to organically fall to around
3.0x or lower by the end of 2014 due to the company's strong free cash flow
(FCF) generation. Nevertheless, given the acquisitive nature of the company,
the existing rating categories build in an expectation that debt-financed
transactions could lead to this ratio being closer to 3.5x. Following the
Seara Brazil acquisition, which was concluded at the end of September, JBS's
net debt to EBITDA ratio was around 4.0x. In the second quarter of 2013, JBS
reported a strong improvement in the performance of its U.S. Beef and U.S.
Poultry businesses, with positive FCF before dividends of BRL563 million.

EXECUTION RISKS OF SEARA TURNAROUND

Execution risk as it relates to Seara is above average. JBS will have to make
significant initial cash investments in working capital in order to strengthen
Seara's operations, address its logistics issues and build upon the strength
of the brand in order to turn the business into a positive FCF division in the
medium term. However, JBS has demonstrated its capacity to integrate several
acquisitions in the past. The Seara transaction will increase JBS's export
capacity and its footprint in the protein business in Brazil from USD12
billion to about USD15 billion.

SOLID BUSINESS PROFILE

JBS's credit ratings are supported by a strong business profile. The company
is the world's largest beef and leather producer. With the acquisition of
Seara Brasil, JBS has become the second largest processed meats producer in
Brazil. The company's product and geographic diversification help to mitigate
risks related to disease and trade restrictions.

NO MAJOR ACQUISITIONS ANTICIPATED

Fitch does not foresee any major acquisitions in the next 18 months as JBS's
management will need to focus on the integration of Seara. However, Fitch does
not exclude some bolt-on transactions in the future as JBS aims to reinforce
its distribution capacity in export markets. While its business profile has
benefited from improved diversification through past acquisitions, the Seara
acquisition highlights JBS's acquisition appetite.

ADEQUATE LIQUIDITY

As of June 2013, about 35% of JBS debt - or BRL8.5billion - was classified as
short-term. This figure compares with BRL7.2 billion of cash and cash
equivalents and USD1.2 billion of available committed lines. JBS assumed
BRL5.8 billion (USD2.6 billion) of Marfrig's bank debt in the aforementioned
transactions and has successfully refinanced this debt with bank debt that
have maturities up to five years.

RATING SENSITIVITIES:

A downgrade could be precipitated by further increase of the group's leverage
ratios, or a sharp contraction in the group's operating margin and FCF
generation in the next 18 months.

An upgrade could result from an increase in the group's capacity to generate
strong FCF. Expanding operating margin over a sustained period of time and
consistent leverage ratios in the range of 2.0x to 2.5x would also be viewed
positively.

Fitch has affirmed the following JBS ratings with a Stable Outlook

JBS S.A.:

--Foreign & local currency IDR at 'BB-';

--Notes due 2016 at 'BB-';

--National scale rating at 'A-(bra)'.

--Debentures at 'A-'.

JBS USA LLC:

--Foreign and local currency IDR at 'BB-';

--Term loan B facility due in 2018 at 'BB'

--Notes due 2014, 2020, 2021 at 'BB-'.

JBS USA Finance, Inc:

--Foreign and local currency IDR at 'BB-';

--Notes due 2014 at 'BB-';

--Bonds due 2020 at 'BB-';

--Notes due 2021 at 'BB-'.

JBS Investments GmbH (formerly ESAL GmbH):

--Notes due 2023 at 'BB-'.

JBS Finance II Ltd:

--Foreign and local currency IDR at 'BB-';

--Notes due 2018 at 'BB-'.

The ratings are informed by 'Fitch Parent and Subsidiary Linkage Criteria'.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 5, 2013).

--'Parent and Subsidiary Rating Linkage' (Aug. 5, 2013).

Applicable Criteria and Related Research:

Parent and Subsidiary Rating Linkage Fitch's Approach to Rating Entities
within a Corporate Group Structure

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=714476

Corporate Rating Methodology: Including Short-Term Ratings and Parent and
Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=805764

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