Marfrig Heads to Four-Week High on Extension of Debt Maturity

Marfrig Alimentos SA (MRFG3), Latin America’s second-largest beef producer, headed to its biggest close in almost four weeks after announcing an agreement with Brazil’s development bank to extend the maturity of debt due next year.

Shares of the meatpacker rose 3.3 percent to 4.10 reais at 4:22 p.m. in Sao Paulo, which would be the highest closing price since Dec. 9. That benchmark Ibovespa index was little changed from the previous session.

Marfrig will sell 2.15 billion reais ($905 million) of domestic bonds convertible into stock and due in 2017 to replace 2015 notes held by the government-owned lender known as BNDES, the Sao Paulo-based meatpacker said late on Dec. 3. The accord will help generate positive cash flow this year, the company said.

The deal is “providing short-term interest expense relief in exchange for slightly more equity dilution and interest payment over the medium term,” said Citibank analysts Alexander Robarts and Marcelo Inoue in an e-mailed report. They maintained the neutral rating for the stock.

With the new issuance, no interest will be paid for the remainder of 2014, Marfrig said. The price for converting the bonds into shares was lowered to 21.50 reais from 24.50 reais.

To contact the reporter on this story: Gerson Freitas Jr. in São Paulo at gfreitasjr@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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