JBS also bought Canada’s second-largest beef-packing plant,
XL Foods Inc. in Alberta.
The value of $1 billion worth of JBS notes has dropped by 11
per cent in three weeks after Brazil’s federal audit court said Npv. 25 that it
found evidence the company received “special treatment” in capital injections
from state-run development bank BNDES.
JBS’s debt had returned 10.3 percent this year before the
announcement, the highest in Brazil’s corporate-bond market which is embroiled
in a graft scandal, recession and political crisis, reports Bloomberg news
agency.
The bank has bought almost 6 billion reais ($1.5 billion) of
JBS shares since 2007.
“It is worrisome,” Omar Zeolla, an analyst at
Oppenheimer & Co., said from New York. “The company could be required to
compensate the bank.”
The audit court, known as TCU, said in e-mailed
documents on Nov. 25 that it found evidence BNDES lost 847.7 million reais in
transactions to help JBS purchase companies in the U.S.
The bank allegedly overpaid for the company’s shares and
gave up a premium payment when JBS acquired Swift & Co. in 2007, the
beef unit of Smithfield Foods Inc. in 2008 and Pilgrim’s Pride in 2009, the
court said in the documents.
According
to Jose Nantala Freire, a lawyer at Peixoto & Cury Advogados, “the
investigation is still in the early stages. Consequences can be huge” if the
court finds evidence of misconduct by JBS executives, Bloomberg reports.
JBS had managed to sidestep the slump in Brazilian bonds
this year by generating record profits and slashing its leverage to an
eight-year low. Leverage is s measure of the percentage of debt.
The company garners more than 80 percent of its sales in
dollars, which means it’s in stronger shape than most Brazilian companies which
face huge challenges because the nation’s currency has collapsed.
The currency fell again this week to 32 percent less than
when the year began.
“The fundamentals are not bad, but headline risk remains
latent,” said Eduardo Ordonez, a money manager in Copenhagen at BI Asset
Management, which oversees $1 billion of emerging-market corporate bonds.
