JBS Closes Jumbo Local Convert

Meatpacker JBS has sold BRL3.48bn in 60-year debentures convertible into JBS US stock, including BRL2.27bn bought by BNDESPar, the investment unit of development bank BNDES. Instead of carrying a fixed coupon, the converts pay a combination of dividends and distributions with no set amount, according to a deal prospectus. The payments can be made partly or entirely in cash, and must be previously announced by the company. There are also a number of conditions that could qualify for the bonds’ conversion into shares. The main one is if the common shares on the Bovespa reach BRL12.50 after having traded for 60 consecutive days in a range of BRL6.50-BRL12.50. If a liquidity event occurs, the shares are also convertible, according to the prospectus, which provides full details on what constitutes such an event. Banco Bradesco managed the issue. Barclays Capital sees the capitalization as a positive development because the debentures are likely to be converted into equity. It adds that this will increase the company’s liquidity and improve credit metrics as proceeds will be used to pay debt related to last year’s acquisition of US-based Pilgrim’s Pride for $2.6bn.