One of Brazil’s last remaining investment-grade credits is coming under fresh scrutiny from bond buyers after a surprise jump in its debt levels.
BRF SA, the country’s largest chicken exporter, saw leverage ratios surge last year as aggressive investments and shareholder payouts were followed by a record loss, leading S&P Global Ratings to cut its outlook on the debt to negative Thursday. A few hours later, BRF said Chief Financial Officer Jose Carneiro Borges was resigning as the company reassesses its management model.
BRF is suffering from a surge in costs to feed its animals following a drought last year that sapped Brazil’s corn harvest, and reduced domestic demand for its meats amid the country’s worst recession in a century. As a result, cash from operations fell by more than half in 2016 to the lowest in five years, according to data compiled by Bloomberg. Meanwhile, the company spent more than 2.5 billion reais ($790 million) in overseas takeovers and 1.7 billion reais to buy back shares and pay dividends to shareholders.
“This is a deteriorating credit,” said Jorge Piedrahita,…