Fitch Rates Marfrig's Proposed USD850MM Notes 'B/RR4'

  Fitch Rates Marfrig's Proposed USD850MM Notes 'B/RR4'  Business Wire  NEW YORK -- June 10, 2014  Fitch Ratings assign a 'B/RR4' rating to the USD 850 million of proposed senior unsecured notes due in 2019 to be issued by Marfrig Holdings (Europe) B.V. and irrevocably and unconditionally guaranteed by Marfrig Global Foods S.A. (Marfrig) and by Marfrig Overseas Limited.  Proceeds are expected to be used to refinance debt maturities.  A complete list of Fitch's ratings on Marfrig follows at the end of this press release.  KEY RATING DRIVERS  Focus on Deleveraging  Fitch expects Marfrig's net debt to EBITDA ratio to organically fall to below 4.0x by 2015 from an annualized 1Q14 leverage ratio of 4.2x. The annualized leverage adjusts for the October 2013 exchange by Marfrig of its branded food business, Seara, and its leather businesses, Zenda, to JBS in exchange for JBS assuming BRL5.850 billion of related debt. Future debt reduction will be driven by better asset and logistics management, a reduction in capex, lower working capital use and decreased interest expenses.  Simplified Business Profile  Marfrig has simplified its organizational structure and decreased execution risk with the divestment of Seara Brazil. 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 systems 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.  Improved Debt Profile  The group has improved its debt maturity and liquidity profile following the divestment of Seara. As of March 31, 2014, the group had BRL2.4 billion of cash and marketable securities. This compared with only BRL1.4 billion of short-term debt. The company is actively engaged in liability management to reduce interest expenses. It has done this through buying back expensive debt and issuing debt with a 6.25% coupon through Moy Park.  RATING SENSITIVITIES:  Considerations that could lead to a negative rating action include the inability of Marfrig to start generating positive free cash flow over the next 24 months while 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 consistently generate positive free cash flow.  Fitch currently rates Marfrig as 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.  The Rating Outlook is Stable.  Additional information is available ''.  Applicable Criteria and Related Research:  --'Corporate Rating Methodology' (May 14, 2014).  Applicable Criteria and Related Research:  Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage  Additional Disclosure  Solicitation Status  ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.  Contact:  Fitch Ratings Primary Analyst Johnny Da Silva Director +1-212-908-0367 Fitch Ratings, Inc. 33 Whitehall St. New York, NY 10004 or Secondary Analyst Gisele Paolino Director +55 21 4503 2624 or Committee Chairperson Joe Bormann, CFA Managing Director +1-312-368 3349 or Media Relations Elizabeth Fogerty, New York, +1 -12-908-0526  
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