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Rating Action:

Moody's reviews Pilgrim's Pride B2 rating for upgrade

Global Credit Research - 22 Aug 2013

Approximately $500 million of debt instruments affected.

New York, August 22, 2013 -- Moody's Investors Service ("Moody's") today placed the ratings of Pilgrim's Pride Corporation ("PPC") under review for upgrade, including its B2 Corporate Family Rating, B2-PD Probability of Default Rating, and Caa1 senior unsecured debt rating. Moody's also upgraded the company's Speculative Grade Liquidity Rating to SGL-1 from SGL-2.

The review for upgrade reflects PPC's strengthening operating performance, the significant amount of debt repaid over the past year through free cash flow, and Moody's expectation than the operating environment of the U.S. chicken processing industry will remain favorable during most of the next 12 months. The review also reflects implicit support from the higher-rated controlling company, JBS S.A., which was confirmed today at Ba3 in a separate rating action.

The upgrade of the Speculative Grade Liquidity Rating to SGL-1 reflects PPC's very good liquidity profile evidenced by over $750 million of combined cash and borrowing capacity and Moody's expectation for positive free cash flow over the next twelve months.

Moody's review will focus on PPC's long-term prospects for sustaining strong free cash flow and its priorities for future uses of cash. Moody's will also take into consideration any influence that JBS S.A. may have on PPC's credit profile in the future.

RATINGS RATIONALE

The B2 Corporate Family Rating (CFR) reflects PPC's concentration in the highly competitive U.S. chicken industry, modest financial leverage, narrow profit margins, positive but volatile cash flow, and very good liquidity. The ratings are supported by the company's position as one the world's largest producers of poultry and by its majority ownership by São Paulo, Brazil-based JBS, S.A. (Ba3 negative), one of the largest protein processors in the world.

The B2 CFR also incorporates the wide range of operating performance that is typical of the cyclical commodity chicken industry. At the top of the cycle, Moody's expects leverage to be very modest relative to the rating category. Conversely, at the bottom of the cycle Moody's can often tolerate leverage that is outside normal bounds for a given rating category for a limited period of time. Importantly, periods of high leverage should be balanced against ample access to external sources of liquidity.

Pilgrim's Pride Corporation:

Ratings under review for upgrade: (LGD assessments updated):

Corporate Family Rating at B2;

Probability of Default Rating at B2-PD;

$500 million senior unsecured notes due 2018 at Caa1 (LGD 5, 86%) from Caa1 (LGD 5, 87%).

Ratings upgraded and not under review:

Speculative Grade Liquidity Rating to SGL-1 from SGL-2.

Headquartered in Greeley, Colorado, Pilgrim's Pride Corporation (NYSE: PPC), is the second largest chicken producer in the world, with operations in the United States, Mexico and Puerto Rico. The company produces, processes, markets and distributes fresh, frozen and value-added chicken products to foodservice customers, distributors and retail operators worldwide. For the twelve months ended June 30, 2013, revenues for the company approximated $8.5 billion. Pilgrim's Pride is controlled by JBS, S.A. through an indirect 75% equity ownership stake.

The principal methodology used in this rating was the Global Protein and Agriculture Industry published in May 2013. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Brian Weddington, CFA
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's reviews Pilgrim's Pride B2 rating for upgrade
No Related Data.

 

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