Brazil Food Firm Eyes Private Funds

Brazilian poultry and meat producer Sadia is heard to be seeking up to BRL1.5bn in equity capital, according to bankers away from the company. The borrower and financial advisors have apparently turned to the private equity market in search of the funds, according to market talk. After taking a BRL760m derivatives hit in September 2008, the company landed a BRL1.5bn 1-year credit line that will need to be refinanced. Bradesco, which is said by a banker at another institution to have provided the line, is heard to be leading the talks to find an equity partner for Sadia, say executives not involved in the process. A Sao Paulo-based investment banker speculates that the meat company seeks to sell a minority stake, though at Monday’s market cap of BRL2.47bn, a BRL1.50bn injection would represent 60%. As such Sadia will have to find a compromise between paying down debt and avoiding the entrance of a new controlling shareholder. The move demonstrates how debilitating losses such as the ones taken by Sadia, Aracruz and Votorantim can be. Sadia’s share price has fallen 67% since September 1, versus a 29% drop by the Bovespa in the same period. It closed Monday at BRL3.40. The company has been squeezed by crumbling sugar prices and near closure of capital markets, both local and international. It was downgraded to B1 from Ba3 by Moody’s in November due to a significant increase in leverage. Sadia and Bradesco executives were not available for comment Monday.