Brazil banks near $5.5 bln JBS debt refinancing -sources

Banco Bradesco

13/07/2017 19:44

By Guillermo Parra-Bernal and Tatiana Bautzer 
    SAO PAULO, July 13 (Reuters) - JBS SA's biggest Brazilian 
creditors are close to refinancing about 18 billion reais ($5.5 
billion) worth of loans due within a year, as the world's No. 1 
meatpacker seeks to stem fallout from a corruption scandal 
involving its controlling family, five people with knowledge of 
the matter said. 
    Caixa Econômica Federal SA, Banco Santander Brasil SA, Banco 
do Brasil SA and Banco Bradesco SA are urging larger rival Itaú 
Unibanco Holding SA to join the plan, under which JBS would get 
a 12-month repayment extension in exchange for a 2 billion-real 
upfront payment and extra collateral, two of the people said. 
    In principle, banks would not adjust the borrowing cost of 
those loans because the risk of JBS failing to honor them 
remains very small, according to one of the people, who asked 
for anonymity because the plan remains private. Bloomberg News 
reported on July 12 that a definitive accord had been struck. 
    São Paulo-based JBS said in a statement that the company 
"remains engaged in a long-term relation with financial 
institutions, with which it has so far maintained productive and 
constructive talks." The banks declined to comment. 
    A refinancing deal is key to stem concerns of a potential 
liquidity strain at JBS, whose borrowing costs surged in the 
wake of the Batista family's decision to enter plea and leniency 
deals related to their involvement in a bribery and graft ring. 
    Shares  JBSS3.SA  of the São Paulo-based meatpacker and food 
processor have tanked 18 percent since brothers Wesley and 
Joesley Batista agreed to a plea deal in mid-May. The company's 
7.75 percent bond due in Oct. 2020  46611DAA3=  shed up to 20 
percent in the same period, sending yields on the security to an 
all-time high. 
    Chief Executive Officer Wesley Batista, the elder of the two 
brothers who control JBS, is personally negotiating the debt 
refinancing deal and asset sales to raise cash, the people said. 
JBS's private-sector banks remain skittish about their state 
peers' push to remove Batista, two of the people said. 
    Itaú fretted about refinancing loans to JBS in early talks, 
demanding immediate repayment of a 1 billion-real credit 
facility due within weeks, the people said. Itaú is not 
participating in any of JBS's planned asset divestitures, one of 
the people said. 
     
    BRIBING POLITICIANS 
    Removing Batista has become common ground between government 
lenders BNDES and Caixa Econômica Federal, Reuters reported on 
June 22. BNDES owns 22 percent of JBS through investment arm 
BNDES Participações SA. urn:newsml:reuters.com:*:nL1N1JJ1X5  
    Caixa  CEF.UL , Brazil's largest mortgage lender, is JBS's 
largest creditor. 
    The refinancing underscores the challenge facing the Batista 
brothers, who over a decade transformed JBS from a mid-sized 
slaughterhouse in Brazil's Midwestern plains into a global 
behemoth that operates in four continents, with the help of 
political relations and low-cost government loans. 
    In May, the brothers admitted to bribing 1,893 politicians 
to facilitate the growth of JBS through BNDES loans. In a plea 
deal with prosecutors, both implicated President Michel Temer, 
unleashing a political crisis that threatens to derail the 
passage of key spending-cutting bills. urn:newsml:reuters.com:*:nL1N1JU1DM 
    JPMorgan Securities analyst Natalia Corfield estimates that 
JBS's total bank debt reached 24.3 billion reais at the end of 
March, of which about 17.5 billion reais would mature within the 
next 12 months. The company's total debt, including bond 
obligations, was almost 59 billion reais.  urn:newsml:reuters.com:*:nL1N1JA1CY 
    ($1 = 3.2959 Brazilian reais) 
 
 (Editing by Chizu Nomiyama) 
 ((guillermo.parra@tr.com; +55-11-5644-7714,+55-119-8346-7153; 
Reuters Messaging: 
guillermo.parra.thomsonreuters.com@reuters.net)) 
 
Keywords: JBS RESTRUCTURING/