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Marfrig cash flow forecasts rise with better funding terms

Jan 6, 2014

Brazilian meatpacker Marfrig has lifted its cash flow expectations after securing a better payment schedule for its convertible debentures

Free cash flow at Marfrig could be as much as 100 million reais ($42 million) this year - up from a previous best-case estimate of break-even - after it agreed to better terms on a convertible debenture with Brazil's development bank, the firm said Friday.

BNDESPar has agreed to switch its holding of 99% of a convertible debenture into a new, privately placed 2.15 billion real three-year instrument. Despite carrying the same interest rate as the outstanding instrument - 1% over the DI - a more favorable payment schedule on the new security has boosted Marfrig's free cash flow estimates.

The new instrument carries an annual interest schedule starting January 2015. That allowed the meatpacker to revise its 2014 free cash-flow forecast to between break-even and 100 million reais, from previous forecasts of between negative 150 million reais and break-even.

The debenture to be issued features a mandatory equity conversion in January 2017, with a floor price of 21.5 reais. That is lower than the 24.5 reais floor price of the old instrument.

BNDES subscribed a 2.5 billion real five-year convertible debenture from Marfrig in 2010, which the firm used to fund its acquisition of US-based Keystone Foods.

Marfrig's sale of its Seara unit in June last year led to a "significant reduction" in its debt, the firm said. LF



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