JBS share offer to raise $2.1 billion

Jon Condon, 24/05/2011


JBS Australia parent company, JBS SA, announced plans this week to raise as much as A$2.1 billion in capital through a share offer.

In late 2009, Brazil's state development bank, BNDES, purchased bonds from the company to help fund the acquisitions of Pilgrim's Pride and Brazilian processor, Bertin, according to

BNDES says it will convert those bonds into shares of JBS SA.

The bonds were to be converted into JBS USA shares following an initial public offering, but the company ultimately cancelled the IPO in January amid unfavourable market conditions. The conversion eliminates the obligation to do an IPO.

"We believe this transaction will remove uncertainty as to what will happen with these debentures and will remove uncertainty due to a possible IPO that at the moment we don't believe is in the best interest of JBS shareholders," JBS SA President Wesley Batista said in a conference call.

JBS officials said they expected to announce terms in early June and conclude the transaction by early July this year.

In addition to the bond issue, JBS said it was working to secure an asset-based loan worth A$1.1 billion, to be finalised in the next few weeks. The funds will be used to refinance debt.

"JBS sees significant benefits in its rebalancing debt process,” Wesley Batista said.

“That includes savings of A$145 million a year from debt cost reduction, since these notes carry a lower interest rate than that of the average interest of the company's current debt, and a more balanced and efficient tax structure."

In a supplementary statement issued this morning, the company said its subsidiary JBS USA (which includes Australia), has established a term loan for A$452m with an interest rate of LIBOR +3pc. JBS opted to expand the initial amount from A$380m due to demand and an interest rate 25 basis points lower than previously indicated.

The Company is working to finalise an Asset Based Loan, which should be concluded in the coming weeks, totaling an additional A$760m. All funds raised will be used to pay down shorter term, higher cost debt at parent company level.

The finance development is unlikely to impact JBS processing or feedlot operations in Australia, sources said.

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