Fitch Rates Marfrig's Tap Issuance of Its 2020 Notes Reopening 'B/RR4'

  Fitch Rates Marfrig's Tap Issuance of Its 2020 Notes Reopening 'B/RR4'

Business Wire

NEW YORK -- March 13, 2014

Fitch rates the tap issuance of the reopening by Marfrig Global Foods S.A.
(Marfrig) of its USD500 million senior unsecured 2020 notes 'B/RR4'.

Proceeds are expected to be used to refinance debt maturities and extend debt
maturity schedule. A complete list of Fitch's ratings on Marfrig follows at
the end of this press release.

KEY RATING DRIVERS

FOCUS ON DELEVERAGING AND CASH FLOW:

Fitch expects Marfrig's net debt to EBITDA ratio to organically fall to below
4.0x by 2015 from 4.2x (4Q13 annualized) at fiscal year-end 2013 (FYE13).
Fitch expects Marfrig to gradually improve free cash flow after 2014 and
operating margin due to better asset and logistics management, lower capex,
lower working capital use and interest expense post-divestment of Seara
Brazil.

SIMPLIFIED BUSINESS PROFILE:

Marfrig has simplified its organizational structure and decreased execution
risk with the divestment of Seara Brazil during 2013. The group is
implementing its strategy called 'Focus to Win', which aims to improve
profitability and revenues with a focus of its commercial strategy towards the
rapid development of the food service and retail channels.

The group is now structured into three business units, Marfrig beef (46% of
revenues), the world's third largest beef producer; Moy Park (25%), one of the
largest poultry-based processed product supplier in the UK; and Keystone Foods
(28%), which processes food for major restaurant chains (notably McDonald's).
The company's product and geographic diversification continues to help to
reduce risks related to disease, trade restrictions and currency fluctuation.
As end-2013, processed foods represented 40% of sales. Revenues were primarily
denominated in USD (43%), Euro/Pound (22%) and the Brazilian real (21%).

NO MAJOR ACQUISITIONS ANTICIPATED:

Fitch does not foresee any major acquisitions for Marfrig in the next 18
months as the company's management will need to focus on improving cash flow
generation. Fitch expects Marfrig to focus on developing its existing
activities. Key initiatives will be the optimization of plants and
distribution by Marfrig Beef, the geographic expansion of Keystone, and the
growth by Moy Park through multi-protein retail sales in markets across UK and
Continental Europe, keystone expanding geographically (Asia and Indonesia) and
developing of new accounts, and Marfrig beef optimizing its plants and
distribution capacity.

IMPROVED DEBT MATURITY AND LIQUIDITY:

The group has improved its debt maturity and liquidity profile following the
divestment of Seara. At FYE13, the group held BRL1.8 billion of cash and
marketable securities with a current debt at about BRL1.1billion. Marfrig's
short-term maturity represented 12.6% of total debt as of FYE13. Marfrig's
largest bond refinancing requirements is now during 2017 (USD600 million).

RATING SENSITIVITIES:

Considerations that could lead to a negative rating action (rating or Outlook)
include Marfrig's inability to start generating positive free cash flow over
the next 24 months and maintaining net leverage above 4.0x. An upgrade of
Marfrig's ratings over the medium term is possible should the company and new
management be able to improve the group's profitability and generate
consistent positive free cash flow and reduce leverage.

Fitch currently rates Marfrig s follows:

Marfrig Global food S.A.

--Local currency IDR 'B';

--Foreign currency IDR 'B';

--National scale rating 'BBB(bra)'.

Marfrig Overseas Ltd

--Foreign currency IDR 'B';

--Senior unsecured notes due 2016 'B/RR4';

--Senior unsecured notes due 2020 'B/RR4'.

Marfrig Holdings (Europe) B.V.

--Foreign currency IDR 'B';

--Senior unsecured notes due 2017 'B/RR4';

--Senior unsecured notes due 2018 'B/RR4';

--Senior unsecured note due 2021 'B/RR4.

Additional information is available '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:

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

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

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Contact:

Fitch Ratings
Johnny Da Silva
Director
+1-212-908-0367
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Gisele Paolino
Director
+55 21 4503 2624
or
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elizabeth.fogerty@fitchratings.com
 
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