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Bank deal helps JBS stabilise $6.5bn debt – for now

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Oscar Rousseau

By Oscar Rousseau+

26-Jul-2017
Last updated on 01-Aug-2017 at 15:02 GMT2017-08-01T15:02:11Z

Preserving original debt repayment agreements was vital to JBS
Preserving original debt repayment agreements was vital to JBS

Meatpacker JBS SA has reached a deal with its lenders to stabilise the terms of billions of dollars in debt owed by its JBS Brazil unit.

The deal extends the original terms of the loans for 12 months and JBS said it would continue to pay interest on the debts of R$20.5bn ($6.5bn) – representing 93% of the loans JBS Brazil has acquired.
 
Terms of the agreement will “ensure the financial liquidity and regularity of JBS operations, as they allow for the stabilisation of short-term indebtedness and the preservation of the bank’s agreements in their original conditions”, the meatpacker said in a securities filing on 25 July.
 
On top of the interest, JBS Brazil will pay four instalments of 2.5% of its total indebtedness over the year.

Some debt may be written off

The business wanted to ensure that its debt repayment agreements were not altered in any way after becoming embroiled in a corruption scandal. Preserving the agreements in their original forms was “necessary” to maintain its financial stability as it deals with the fallout, the company said.

JBS added that if it events occurred where it might sell off assets, it would gradually write off the debt – with the exception of the sale of its beef operations in Argentina, Paraguay and Uruguay.

Alongside talks with public and private financial institutions, JBS Brazil has entered into an agreement with Brazilian bank Itaú Unibanco to renegotiate repayment of its debts. This will see JBS Brazil pay 40% of its debt as originally contracted, but the remaining 60% will be paid in the next 12 months.

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