Brazil-JBS-Friboi get new credit rating.

BRAZIL-NEW RATING FOR JBS-FRIBOI.

Fitch Ratings has assigned a ’B+/RR4’ rating to JBS S.A.’s (JBS) proposed USD400 million senior unsecured notes due 2014 issued though its wholly owned subsidiary, JBS USA, LLC (JBS USA). These notes are guaranteed by JBS USA’s domestic subsidiaries (excluding JBS Five Rivers Cattle Feeding, LLC), by parent JBS USA, Holdings, Inc (Holdings) and by ultimate parent, JBS. The JBS guarantee may be released under certain conditions and key covenants would not apply if the notes are rated investment grade. Proceeds from the notes will be used to repay part of the USD659 million intercompany debt at Holdings related to the Smithfield’s U.S. beef acquisition. Fitch also has the following ratings on JBS:

--Foreign currency Issuer Default Rating (IDR) ’B+’;

--Local currency IDR ’B+’;

--USD275 million outstanding senior notes (due 2011) ’B+/RR4’;

--USD300 million outstanding senior notes (due 2016) ’B+/RR4’;

--Long-term National Scale rating of ’BBB+(bra)’;

--BRL400 million proposed bank credit facility (CCB) Long-term National Scale rating of ’BBB+(bra)’.

The Rating Outlook is Stable.

JBS’ ratings are based on the strong and global competitive position of its businesses, the commodity and cyclical risks associated with the meat business, and the company’s high financial leverage, resulting from the aggressive growth strategy of its businesses over the past few years. The ratings also incorporate expectations that JBS will maintain its high liquidity position and that its credit measures will gradually strengthen due to the acquisition of Tasman and Smithfield Beef during 2008, which are expected to add at least USD150 million in annual EBITDA in 2009. The probable gains in scale, and greater geographic and product diversification are also expected to provide JBS with greater stability in its cash generation, and less volatility in consolidated operating margins.

JBS benefits from its geographic diversification both domestically, with plants in nine Brazilian states, and internationally, with plants in the United States, Argentina, Italy and Australia. The geographic diversification of its businesses mitigates risks related to disease, the imposition of sanitary restrictions by governments, market concentrations, as well as tariffs or quotas applied regionally by some importing blocs or countries. JBS’ businesses are exposed to the volatility of raw material costs, live cattle and local and international beef prices, the imbalance between supply and demand in the protein market, and competitive pressures on the part of other Brazilian or international producers and exporters.

As of Dec. 31, 2008, JBS had cash on hand of BRL2.3 billion (USD990 million) compared with short-term maturities of BRL2.2 billion (USD957 million). Total debt was BRL5.6 billion (USD2.4 billion). During October 2008, the company paid USD565 million of cash to acquire Smithfield Beef. For 2008, JBS’ EBITDA was BRL1.15 billion (USD625 million). This figure would have been BRL1.69 billion (USD923 million), if Smithfield Beef had been consolidated for all of 2008, resulting in a pro forma net leverage (net debt/EBITDA) ratio of 2.0 times (x) compared to 3.7x in 2007.

Fitch views favorably the recent announcement by JBS that it has terminated the acquisition process for National Beef Packing Company, LLC, as this transaction would have increased the company’s leverage significantly and would have weakened its liquidity. The decision by JBS to abandon this acquisition resulted from its inability to reach satisfactory conditions with the U.S. Department of Justice, which had filed a suit to block the transaction due to concerns about the high concentration of the industry by Tyson, Cargill and JBS.

JBS is one of the world’s largest beef producers, with operations in Brazil, the United States, Argentina, Australia and Italy. The company is the largest producer and exporter of fresh meat and meat by-products in Brazil, Argentina and Australia and the third largest in the U.S. JBS USA concentrates JBS operations in the U.S. and Australia, which represent approximately 70% of total revenues.

Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, 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.

SOURCE: Fitch Ratings

Fitch Ratings