Bloomberg News

JBS Parent Bows to Yield Surge as Brazil Offerings Scrapped

February 11, 2013

Brazil’s J&F Participacoes SA, the parent of the world’s biggest beef producer, postponed a planned junk bond sale three days after a surge in borrowing costs led a Brazilian oil company to scrap a debt offering.

The holding company of JBS SA shelved plans to sell seven- year dollar notes after meeting investors in the U.S. and Europe, according to a person familiar with the transaction, who asked not to be identified because he isn’t authorized to speak publicly. Barclays Plc, Banco do Brasil SA, Morgan Stanley and Banco Santander SA were arranging the transaction.

Schahin Oil & Gas Ltd., which operates six offshore drill rigs for Petroleo Brasileiro SA, shelved on Feb. 8 plans to sell at least $500 million of seven-year dollar bonds. Yields on high-yield emerging-market corporate debt soared 0.24 percentage point in the past two weeks, the most since June, tracking an increase in U.S. Treasury yields, according to JPMorgan Chase & Co.’s CEMBI index.

“We have seen a selloff in emerging-market assets and increasing yields,” Roy Yackulic, a corporate debt analyst at Bank of America Corp., said by e-mail.

J&F, whose chairman is Brazil’s former central bank president Henrique Meirelles, had plans to issue $300 million of bonds due 2020, according to Standard & Poor’s. The company is rated B+ by the ratings company, four levels below investment grade, while Schahin’s proposed bonds were ranked BB+, the highest junk rating.

Junk Offerings

Bonds issued by JBS have fallen in the secondary market after the beef producer sold $500 million of debt last month. The yields on the company’s bonds maturing in 2023 rose 28 basis points to 6.78 percent since the securities were issued Jan. 29, according to data compiled by Bloomberg. U.S. Treasury 10-year note yields have risen 19 basis points this year to 1.95 percent.

The scrapped deals followed a surge in Brazilian junk debt offerings in January. High-yield bonds accounted for 80 percent of the $5.6 billion raised by Brazilian companies in 2013, compared with 18 percent a year earlier, according to data compiled by Bloomberg.

A day before Schahin scrapped its bond offering, QGOG Constellation SA postponed its initial public offering, citing “market conditions.” The rig operator was poised to end a two- year energy IPO drought in Brazil.

QGOG Constellation, one of the world’s 10 largest drilling companies, filed on Jan. 7 to raise more than $500 million in an offering.

To contact the reporter on this story: Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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