J&F Investimentos may sell stakes in some of its subsidiaries to raise funds for its meatpacking business JBS, sources familiar with the company’s plans told LatinFinance.
The company could offload stakes in footwear unit Alpargatas and Eldorado, which operates a $6.2bn pulp mill in the state of Mato Grosso do Sul, two sources in Sao Paulo said.
JBS signed a plea bargain with federal prosecutors, after local press published a recording with one of the company’s major shareholders, Joesley Batista, discussing bribes with President Michel Temer.
Brazil’s securities regulator CVM is also looking into allegations of insider trading by some of JBS’ controlling shareholders.
The plea agreement reportedly includes roughly BRL11bn ($3.36bn) in fines. “It is not nothing, but JBS is a big company,” an M&A source in Sao Paulo said.
J&F acquired a controlling stake in Alpargatas from Camargo Correa for BRL2.7bn in November 2015. It increased its share in October last year through a BRL499m tender offer. Alpargatas makes Havaianas flipflops among other footwear brands.
Eldorado’s Mato Grosso do Sul pulp mill was partially financed with a BRL2.7bn loan from the national development bank BNDES in June 2011.
“If JBS needs money, it has a pulp mill that would make sense for the three major players,” said a second source in Sao Paulo, referring to Brazil’s largest paper companies, Fibria, Klabin and Suzano.
Fitch Ratings downgraded Eldorado to B from B+ and placed the company on negative watch. The rating agency said the plea agreement would hinder its ability to obtain financing or sell assets.
Eldorado had BRL9.1bn in debt, including BRL2.4bn in short-term debt, and BRL1.2bn in cash at the end of last year, according to Fitch.
Fitch warned it could downgrade Eldorado again if the plea bargain does not lead to more financing from BNDES and other local banks, now that the company is shut out of the international capital markets.
Eldorado last June sold $350m in five-year cross-border notes.