The US subsidiaries of meatpacker JBS, rated Baa3/BB+/BBB-, priced a US$1.5bn 144A/Reg S benchmark offering on Wednesday that includes the borrower's inaugural long bond.
A US$600m seven-year senior unsecured note due in 2029 was priced with a 3.00% coupon and reoffered at 98.366 with a spread of US Treasuries plus 145bp. And a US$900m 30-year note due 2052 was priced with a coupon of 4.375% and reoffered at 99.967% with a spread of US Treasuries plus 220bp. The notes were guided at 145bp and 220bp over Treasuries, respectively, and tightened from initial price thoughts of 170bp area and 235bp area.
Proceeds will be used to fund the redemption of 2028 notes and for general corporate purposes. The active bookrunners are Barclays, BMO Capital Markets, Mizuho and RBC Capital Markets.
CreditSights noted that the JBS USA Lux S.A., JBS USA Food Company and JBS USA Finance Inc initial price talk, when compared to peer Tyson Food's longest dated bond due 2048, implied over 100bp of incremental spread in the new JBS long-dated paper.
"For its inaugural long-dated bond we expect to see meaningful spread compression from IPT but think the notes will likely come more than 50-60bp wide to the (Tyson Foods) 2048 comp based on secondary pricing levels," CreditSights said.
Looking ahead, CreditSights said, "We expect JBS to remain active in refinancing its high-coupon/callable bonds now that its is IG-rated. We anticipate the US$750m in 5.75% JBS USA notes due in 2028 that become callable in July will be refi-ed at first call."
JBS was last in the market in November when subsidiaries of the Brazil-based global packaged meat producer JBS SA priced US$2bn of bonds, including a sustainability-linked note. The bond offerings were JBS's first since Moody's Investors Service raised its unsecured ratings to Baa3, the lowest rung of investment grade, from Ba1 on November 5. This followed an upgrade from Fitch Ratings in June to BBB- from BB+. S&P Global Ratings, which upgraded JBS to BB+ last October, had affirmed its ratings.
At the time, a US$1bn five-year note was priced with a 2.50% coupon at 98.947 to yield 2.72%, at US Treasuries plus 145bp. A US$1bn 10-year note was priced with a 3.00% coupon at 98.709 to yield 3.146%, at US Treasuries plus 150bp.
JBS SA, based in São Paulo, Brazil, is the world's largest protein producer in terms of revenue, slaughter capacity and production, and the second-largest pork producer in the US, according to Moody's. The company has operations in more than 20 countries with more than 450 offices and plants.
Fitch Ratings said it expects JBS's net leverage to remain below 2.0x in 2021, driven by sales and EBITDA growth, primarily as a result of the strong performance of its US beef operations.
"JBS's fundamentals are further supported by strong overall demand for protein, notably from Asia, high beef prices, the reopening of its food service segment," Fitch said. "These positive fundamentals are somewhat tempered by high feed and cattle costs in Brazil, higher labor costs in the US and increased uncertainty regarding the global economic impact of a highly contagious variants, such as Omicron."
Updated story: Updates with pricing