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TEXT - Fitch rates Minerva Luxembourg S.A.
January 15, 2013 / 8:57 PM / 5 years ago

TEXT - Fitch rates Minerva Luxembourg S.A.

(The following statement was released by the rating agency)
    Jan 15 - Fitch Ratings has assigned an expected rating of 'B+/RR4' rating to
Minerva Luxembourg S.A.'s proposed USD500 million senior unsecured notes due
2023. These notes will be unconditionally guaranteed by Minerva S.A. (Minerva).
Proceeds are expected to be used to refinance in part or in whole the
outstanding notes due 2017, 2019 and 2022, also issued by Minerva Luxemburg S.A.
A complete list of Fitch's ratings of Minerva follows at the end of this

Minerva's ratings are supported by the company's business position as the 
second-largest Brazilian exporter of fresh beef and its strong liquidity 
position. Risks include the company's high product and production concentration 
in Brazil, which limit its flexibility to respond to regional bans on exports. 
Similar to other Brazilian protein processors, Minerva is exposed to the 
unfavorable currency fluctuations and potential disease outbreaks. 

For the LTM ending Sept. 30, 2012, Minerva's EBITDA increased by 36% to BRL446 
million from BRL328 million during 2011. During the same period, EBITDA margins 
increased to 10.5% from 8.2% in 2011. These improvements fed through to the 
company's cash flows. Minerva's cash flow from operations (CFFO) was BRL373 
million, a significant improvement from negative BRL10 million in 2011. Free 
cash flow (FCF) was BRL244 million, reversing seven straight years of negative 

As of Sept. 30, 2012, Minerva had BRL2.6 billion of total debt and BRL920 
million of cash and marketable securities. These levels of debt and cash compare
with 2.1 billion of debt and BRL746 million of cash as of Dec. 31, 2011. The 
increase in total debt is primarily a result of the depreciation of the 
Brazilian real versus the U.S. dollar during the year, as about 81% of the 
company's debt as of Sept. 30, 2012 was denominated in USD. Per Minerva's 
estimation, the total exposure to USD is slightly lower at 74%, due to existing 
currency swaps. As of Sept. 30, 2012, the company's net leverage was 3.8x. This 
level of leverage was higher than Fitch's previous expectation of 3.0x for the 
end of 2012 - a level consistent with the rating category during a positive 
moment in the beef cycle. During December 2012, Minerva issued BRL470 million of
equity, which lowered its pro forma net leverage to 2.7x.

Fitch expects Minerva's free cash flow generation to be negative to neutral in 
2013. The company's recently announced plans to increase expansion capex and to 
pursue acquisitions in the Brazilian state of Mato Grosso, Uruguay, Paraguay and
Colombia. While these investments should limit deleveraging, they should improve
the company's business profile. By 2015, the percentage of Minerva's sales from 
processed food should increase to about 10% of revenue from 5% during 2012, 
while its revenues from operations outside of Brazil should increase to 20% - 
25% from 12% in 2012. 

Key Rating Drivers 

The ratings are likely to remain stable unless cash flow generation and leverage
ratios trend different than Fitch's expectations. A positive rating action could
be triggered by additional decreases in leverage to about 2.0x in mid cycle. 
This level of debt reduction is unlikely to be achieved in the short-to-medium 

A negative rating action could occur if net leverage increases to 4.0x on a 
normalized basis. This could be as a result of either a large debt financed 
acquisition or asset purchases, or as a result of operational deterioration due 
to disruptions in exports. 

Fitch currently rates Minerva and Minerva Luxembourg as follows: 


--Local currency Issuer Default Rating (IDR) 'B+';
--Foreign currency IDR 'B+';
--National scale rating 'BBB+(bra)';
--BRL200 million outstanding debentures due 2015 'BBB+(bra)'. 

Minerva Luxembourg:
--Local currency IDR 'B+';
--Foreign currency IDR 'B+';
--Senior unsecured notes due in 2017, 2019 and 2022 'B+/RR4'. 

The Rating Outlook for Minerva and Minerva Luxembourg is Stable. 

 (Caryn Trokie, New York Ratings Unit)

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