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Rating Action:

Moody's changes JBS USA, LLC's outlook to positive

 The document has been translated in other languages

18 Sep 2009

Approximately $700 million in debt securities affected

New York, September 18, 2009 -- Moody's Investors Service today changed the rating outlook of JBS USA, LLC ("LLC") to positive from stable based on the expected receipt of up to $2.5 billion in new common equity to fund the acquisition of Pilgrim's Pride Corporation and to reduce debt in the global consolidated JBS enterprise. Moody's affirmed the company's B1 senior unsecured debt rating. The corporate family rating of ultimate parent JBS S.A. is B1 and its outlook is positive.

Rating affirmed:

$700 million senior unsecured Notes due 2014, and guaranteed by JBS S.A., at B1

JBS S.A., through subsidiary JBS USA Holdings, Inc., has agreed to purchase 64% of Pilgrim's Pride Corporation, currently in bankruptcy, for $800 million in cash. The $800 million will be funded with a portion of the $2.5 billion from the sale of up to 26.3% common equity interest in JBS USA Holdings, the immediate parent of JBS USA, LLC, to a private investor. Moody's expects that Pilgrim's Pride planned $1.75 billion senior secured exit facility will be standalone, with no guarantees or other support from any JBS entity. In the quarter ending June 27, 2009, Pilgrim's Pride reported approximately $108.6 million in operating profit, a significant improvement over the two prior quarters. Stronger chicken prices following industry capacity reductions, and lower feed-grain costs, have boosted the margins of domestic chicken producers in 2009.

The change in outlook to positive at ultimate parent JBS S.A. is based on the expectation that part of the excess proceeds from the $2.5 billion equity issue will be applied to debt reduction within the consolidated company. The outlook change also recognizes the benefits of further size, scale and diversification as well as the significant synergy opportunities that transactions with Pilgrim's Pride and also Bertin bring to JBS S.A. Finally, Moody's further anticipates that JBS USA Holdings will execute its plan for an initial public offering in the near term.

With these transactions, ultimate parent JBS S.A. will become the world's largest animal protein company. JBS S.A. currently has total management and ownership control of issuer JBS USA, LLC and its immediate holding company JBS USA Holdings, Inc. -- including the ability to formulate strategy. JBS S.A.'s ownership stake in JBS USA Holdings will fall upon the issuance of $2.5 billion equity to a private investor, and will drop further upon the proposed IPO; but JBS S.A. is likely to remain the controlling shareholder, and the Batista family is expected to be the controlling shareholder of JBS S.A. JBS S.A. guarantees LLC's $400 million unrated 'ABL' expiring in November 2011 and the rated Notes. There is some intercompany debt owed by JBS USA Holdings to the Brazilian parent JBS S.A. LLC's ABL and its Notes allow for the payment of dividends up to 50% of consolidated net income as defined, and do not limit the amount of loans that Holdings or LLC can make to JBS S.A. The US businesses currently account for the majority of JBS S.A.'s global consolidated operations. For these reasons, the B1 corporate family rating of JBS S.A. is the basis for the rating for LLC's Notes. The rating of the Notes is also at the same level as JBS S.A.'s $300 million 10.5% senior unsecured notes due 2016, which are guaranteed by JBS USA Holdings, by LLC and by Swift Beef.

For more information in JBS USA, LLC, see Moody's credit opinion on moodys.com.

Moody's most recent rating action for JBS USA, LLC on April 14, 2009 assigned a B1 rating to this issuer's Notes, with a stable outlook. On April 27, 2009 Moody's commented that the outbreaks of influenza A (H1N1) had not at that time had an impact on the rating of the issuer. The principal methodology used in rating JBS USA, LLC was Moody's Global Natural Products Processors -- Protein and Agriculture methodology published in March 2006 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

JBS USA, LLC is one of the world's leading beef and pork processing companies. Its largest business segments are domestic beef processing (70.1% of fiscal 2008 sales, pro forma for a full year of Smithfield beef), domestic pork processing (16.1%) and beef operations in Australia (13.8%). Reported sales for the twelve months ended June 30, 2009 were approximately $13.4 billion. JBS USA, LLC is ultimately wholly owned by JBS S.A., the world's largest beef producer in terms of slaughter capacity.

New York
Elaine E. Francolino
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Sao Paulo
Alexander I. Carpenter
Senior Vice President - Regional Credit Officer
Corporate Finance Group
Moody's America Latina Ltda.
55-11-3043-7300

Moody's changes JBS USA, LLC's outlook to positive
No Related Data.
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