Credit market volatility helps JBS upsize bond buyback

2 min read
Americas, Emerging Markets
Jo Bruni

Unusually volatile conditions in the credit markets this month allowed the US subsidiaries of Brazil's JBS, one of the world's largest protein producers, to significantly increase its target for bond buybacks this week.

When the Novo Mercado-listed company launched a benchmark bond offering on June 6 to fund a planned buyback, it intended to raise about US$1.5bn. Demand turned out to be much stronger than expected, however, and the meat producer was able to raise US$2.5bn. Yet as the early deadline for US$1.2bn tender offer approached, overall bond market demand decreased along with prices, spurring more JBS investors to tender.

Baa3/BBB-/BBB- rated JBS was able to expand the buyback by US$750m, taking advantage of the volatile swing in bond market demand as investors reacted to rate hikes by central banks this month.

"Between the closing of the new issue on June 6 and the early tender expiration date on June 17 we saw a significant market deterioration that ended up supporting our tender offer price acceptance," a JBS spokesperson said by email on Wednesday. "With that, we were able to upsize the tender again, while still preserving cash for the balance sheet."

On the morning of June 6, the company announced a tender offer to purchase for cash US$900m of its the 6.75% senior notes due 2028 and US$300m of its 6.5% senior notes due 2029. Later that day, after placing a US$500m 5.125% senior note due 2028, a US$1.25bn 5.75% senior note due 2033, and a US$750m 6.5% 2052 senior note, JBS upsized its offer to buy back the 2029s to US$600m.

On Tuesday, it upsized the offer to buy the 2029s to US$1.05bn and announced that it had received tenders for US$761.04m for its 2028 notes, and US$1.25bn for its 2029 notes by the early tender date.

The US subsidiaries of Brazilian meatpacker are JBS USA Lux, JBS USA Food, and JBS USA Finance. The bookrunners were Barclays, BMO, Mizuho, RBC Capital and Truist Securities. They were also dealer managers in the buyback.

Besides the US and Brazil, JBS also has operations in Canada, Australia, the UK, France, Mexico, Argentina and Paraguay.