Moody’s Sees Benefits in Marfrig M&A

Marfrig’s Mercosur expansion is positive for the credit outlook, according to Moody’s. “Although these acquisitions present integration challenges , they are positive for the rating to the extent that geographic diversification of raw material sourcing increases and the potential impact of closure of export markets due to animal disease decreases,” says Moody’s analyst Soummo Mukherjee. Brazil’s Marfrig is offering $267m for a 70.51% piece of Argentine meatpacker Quickfood, which also has operations in Uruguay. Quickfood exports to LatAm, Europe, Asia and the Caribbean. Moody’s affirmed the B1 ratings and stable outlook and notes that the exact financing of the transaction has not yet been finalized. However, at the end of June 30, Marfrig had a cash and cash equivalent balance of BRL987m and an undrawn committed facility of USD100m to cover the company’s short-term debt of BRL112m, working capital needs and growth investments, including capital expenditures and strategic acquisitions. “The current B1 rating and stable outlook assumes that Marfrig will preserve its comfortable liquidity cushion and maintain debt to Ebitda below 4.0x according to Moody’s definitions. Marfrig’s debt to Ebitda was 3.6x for the last 12 months ending in June 30,” says the agency.