Brazil’s development bank plans to inject capital into Marfrig Alimentos SA, the country’s second-largest food company, to help it lower debt from a record high, a person directly involved in the deal said.
The bank, known as the BNDES, plans to buy shares at planned offering of new stock to at least maintain its stake of about 14 percent in the meatpacker, said the person, who spoke on condition of anonymity because the discussions are private. The lender will also convert 366.7 million reais ($181 million) of Marfrig bonds into shares as part of the offering, according to a Oct. 24 filing. Without the additional purchase, the BNDES stake in Marfrig would drop to about 12 percent.
Marfrig’s debt tripled in the past two years to a record 9.3 billion reais at the end of the third quarter after the company made 20 acquisitions since 2007. The company, which follows meatpacker Minerva SA in selling shares to cut debt, said this week it plans to raise about 1.1 billion reais.
BNDES, whose equity investment in Marfrig has lost 45 percent since 2007, bought 2.5 billion reais of convertible bonds to help Marfrig acquire a McDonald’s Corp. supplier in 2010. The local bonds it doesn’t convert in the stock offering are set to be swapped for equity in 2015.
Marfrig earnings before interest, taxes, depreciation, and amortization of 549.8 million reais in the third quarter surpassed the 435.8 million reais expected by analysts, according to data compiled by Bloomberg. Marfrig this week reported net income of 10.4 million reais, compared with a loss of 54 million reais expected by analysts, after losses stemming from a currency drop weren’t repeated.
A BNDES official in Rio de Janeiro declined to comment.