S&P Global Ratings on March 16 lowered BRF SA's global scale corporate credit and issue-level ratings to BB+ from BBB-, citing "recent consecutive negative events."
The agency, which revised its rating outlook for the Brazil-based food producer to negative from stable on Feb. 23, kept the outlook at negative to reflect the challenges that it expects the company to face in recovering its margins and deleveraging to debt to EBITDA in the 3.5x to 4.0x range in 2018.
The downgrade comes the same day as Brazil's agriculture department halted BRF's poultry exports to the European Union due to sanitary concerns. The company is linked to a food safety investigation that reportedly led to the arrest of former CEO Pedro Faria and other employees. BRF is also set to hold an extraordinary general meeting next month as some shareholders seek to oust the company's entire board.
S&P said the recent negative events surrounding BRF, along with a weaker-than-historical balance sheet, could prevent the company from reducing leverage in the short term.
The agency affirmed BRF's brAAA national scale rating outlook. S&P said it will assign a recovery rating to the company's bonds in the next 30 days due to the downgrade.
S&P added that it could further downgrade BRF's ratings over the next six to 12 months if the current export restriction and negative events bring additional volatility to the meat producer's business.
The revised rating comes 10 days after Moody's also downgraded BRF's corporate family rating to Ba2 from Ba1, citing weak credit metrics.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.
