Marfrig Bonds Sink as Moody’s Considers Cutting Credit Rating

Marfrig Alimentos SA (MRFG3)’s bonds fell the most in five weeks after Moody’s Investors Service put the Brazilian meatpacker’s rating under review for a reduction on concern it’s not generating enough cash to meet debt payments.

The yield on the company’s dollar debt due in 2016 soared 1.86 percentage points to 11.75 percent at 11:12 a.m. in Sao Paulo, the steepest increase since April 18, according to data compiled by Bloomberg. The bonds’ price fell 5.15 cents to 94.08 cents on the dollar. Shares dropped 0.5 percent to 7.43 reais after paring a decline of as much as 2 percent.

Marfrig may have trouble paying the 3.3 billion of reais of debt ($1.6 billion) coming due in the next two years as it struggles to generate cash, Moody’s analysts including Marianna Waltz wrote in a report published after the close of trading yesterday. The meatpacker is rated B2, five steps below investment grade.

Marfrig last month announced plans, which include selling South American plants, to cut its debt by $1 billion after posting a net loss of 81.2 million reais in the first quarter.

The Sao Paulo-based meatpacker’s press office didn’t immediately respond to a phone call from Bloomberg News seeking comment.

To contact the reporters on this story: Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net; Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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