July 13, 2020

DealBook: JBS of Brazil in $2.7 Billion Deal

A JBS meat packing plan in Sao Paulo in 2005.Paulo Whitaker/ReutersA JBS meat packing plan in Sao Paulo, Brazil, in 2005.

Brazil’s food sector took a move toward consolidation on Monday, as Marfrig announced the sale of its subsidiaries Seara Brasil and Zenda to its rival JBS.

As payment, JBS will assume 5.85 billion reais, or $2.7 billion, of Marfrig’s debt, according to documents filed with the Comissão de Valores Mobiliários.

Marfrig, which before the sale had more than 13 billion reais, or $6 billion, in debt, had said in May it would seek to sell off subsidiaries as part of a restructuring plan. The units in the announcement Monday include pork and poultry operations in Brazil and leather operations in neighboring Uruguay.

Marfrig’s chief executive, Sergio Rial, said in a news conference on Monday that the deal would reduce his company’s size by a third, cutting revenue to 16 billion reais, or $7.4 billion, from 28 billion reais.

Mr. Rial also said no banks were involved in brokering this deal, which will make JBS the second-largest food processor in Brazil and the largest poultry company in the world, according to JBS’s chief executive, Wesley Batista.

JBS, already the world’s biggest producer of beef, will now have more than 100 billion reais, or $46 billion, in global revenue. Its American operations include the Pilgrim’s Pride poultry brand.

Mr. Batista said that despite the added debt, JBS had the capacity to finance the operation without issuing new debt or equity, but “it is too soon to know if we will access the capital markets.”

The boards of both companies have approved the operation, but JBS’s shareholders must still vote on the deal, and Brazil’s antitrust authority, the Conselho Administrativa de Defesa Econômico, must also approve the operation for it to go through.

Market reaction in São Paulo on Monday was far more positive for Marfrig, which may have found a way out of its debt burden, than for JBS.

Early afternoon on the BMF Bovespa, Marfrig shares were up nearly 9 percent, while JBS’s shares were down more than 7 percent.

Article source: http://dealbook.nytimes.com/2013/06/10/jbs-of-brazil-in-2-7-billion-deal/?partner=rss&emc=rss

Greece Reaches a Deal for More Bailout Money

“We wrapped it up; we have a deal with the troika,” Yannis Stournaras, the nation’s finance minister, told reporters.

Greece has been offered two bailouts worth 240 billion euros, or about $310 billion, over the last three years through a memorandum of understanding with the troika, which comprises the European Commission, the European Central Bank and the International Monetary Fund.

In a televised address, Prime Minister Antonis Samaras said the deal showed that years of austerity were beginning to pay off.

“The situation is changing,” he said. “Until recently, Greece had been the example to avoid. In two years, Greece will no longer depend on the memorandum. It will be a country with growth.”

The troika issued a joint statement saying that Greece was on course to curb its huge debt burden, which stood at 160 percent of gross domestic product at the end of last year.

“Fiscal performance is on track to meet the program targets, and the government is committed to fully implement all agreed fiscal measures for 2013 to 2014 that are not yet in place,” the troika said, adding that the release of a loan installment of 2.8 billion euros that had been due in March “could be agreed soon by the euro area member states.”

Poul M. Thomsen, the I.M.F. envoy to Athens, said in a conference organized by The Economist that the 2.8 billion euros, as well as an additional 7.2 billion euros for the recapitalization of Greek banks, could be released as early as next week

The troika said that an agreement had been reached on streamlining the Greek civil service and emphasized the importance of recapitalizing Greek banks without delay.

It added that Greece would probably return to growth next year.

Mr. Stournaras was even more upbeat, saying Greece aimed to achieve a primary surplus this year, which would allow it to seek more debt relief, according to an agreement with creditors.

The issue that caused negotiations to stall in mid-March was the overhaul of the civil service, a contentious topic that has tested the cohesion of Greece’s fragile coalition government.

The two sides finally agreed over the weekend that 15,000 civil servants would be dismissed by the end of next year, including 4,000 this year, according to reports in the Greek news media. The departures are to include employees close to retirement and an estimated 2,000 who have been accused of disciplinary offenses.

In his address, Mr. Samaras said the 15,000 layoffs in the state sector would be replaced by new recruits as part of “a qualitative upgrade of the civil service.”

“The same number of new young people will be recruited in their place,” he said.

Mr. Thomsen of the I.M.F. had said earlier that there would be new hires in the civil service, without specifying how many or in which areas, though the troika is believed to be eager to see the bolstering of tax collection services.

The plan for the civil service overhaul prompted vehement reactions from the government’s political rivals, with Alexis Tsipras, the head of Syriza, the main leftist opposition party, calling it “a human sacrifice” that would merely swell the ranks of the unemployed, who now make up 27 percent of the population.

Others have said they suspect the hiring pledge is a way to start laying people off without strong protests.

Antonis Manitakis, the administrative reform minister who has been assigned the task of overseeing the public sector overhaul, said on Monday that the Greek civil service, which had just under 800,000 employees in 2010 when the country signed the first of its two foreign bailouts, was expected to shrink by a quarter by 2015, with 180,000 departures. These departures would include layoffs but would chiefly be early retirements, Mr. Manitakis said, without offering a breakdown of the figures.

As Mr. Samaras confirmed in his speech, foreign inspectors also accepted Greek demands to reduce by 15 percent a property tax that was introduced as an emergency measure in 2011 but has been extended.

The two sides were also said to have agreed on allowing Greeks who owe taxes and social security debts to pay them off in up to 48 monthly installments.

Mr. Thomsen said that widespread tax evasion “remains a huge problem,” though he added that Greece had “indeed come a long way.”

“The fiscal adjustment has been exceptional by any standard,” he said.

Article source: http://www.nytimes.com/2013/04/16/business/global/greece-reaches-new-deal-with-lenders.html?partner=rss&emc=rss

Euro Zone Finance Ministers to Meet Again on Greek Bailout

Euro zone finance ministers are to gather in Brussels on Monday for their fourth meeting in four weeks. Last week, they hashed out a plan under which Greece can try to unlock a long-overdue bailout loan installment. The country needs the money desperately to avoid bankruptcy, to pay wages and pensions and to carry out economic overhauls demanded by its international creditors.

The finance ministers are expected to vet Greece’s planned response to a central provision of that plan: a buyback of some of the Greek bonds held by investors, at a discount, as a way to reduce its staggering debt load.

Greece has until Dec. 13 to make that happen, if it hopes to receive its next round of bailout money.

With the Greek economy continuing to fall, the meeting of finance ministers is coming against a backdrop of grim new data for the euro region as a whole. Despite an optimistic forecast Friday from the European Central Bank president that the euro zone would emerge from recession sometime in the second half of next year, the nearer-term data indicate that things may get worse before they possibly get better.

Figures released Friday showed euro zone unemployment rising to a new high in October, with nearly 19 million people — 11.7 percent of the 17-nation currency bloc’s work force — without jobs.

Greece’s international lenders froze aid in June because they perceived the government to be dragging its heels on fulfilling the terms of its bailout program. Since then, the country has accelerated the economic revamping and budget cuts that creditors have demanded.

But the economic outlook for Greece has worsened significantly in the interim — some critics blame the austerity program, in part — prompting the International Monetary Fund to put pressure on lenders, including Germany, to relieve some of the debt burden.

A centerpiece of those efforts, agreed upon last week, is the debt buyback. The plan is for the authorities in Athens to borrow European funds to purchase Greek bonds that are already trading at a deep discount from their face value.

The buyback plan may have allayed fears of an imminent Greek default, but how well it will work remains to be seen. Some in the financial sector have complained about the prospect of having to sell bonds at fire-sale prices.

The Market Monitoring Group of the Institute of International Finance, a global association of banks and other financial institutions, said last week that it was “critical that any buyback be conducted on a purely voluntary basis.” But Yannis Stournaras, the Greek finance minister, warned Greek banks holding many of the bonds that participation was a “patriotic duty.”

But unless Greece reduces its debt, the I.M.F. could still refuse to approve aid. That would probably mean another flurry of emergency meetings to draw up yet another plan.

In a sign that at least some investors are eager to sell back their Greek bonds, if the price is right, some big hedge funds have been accumulating the bonds on the open market.

Those funds, including Third Point and Brevan Howard, are betting that to make the buyback succeed — so Athens can get its next loan installment — the Greek government will have to meet their price demands. On the open market, the bonds in question are trading at about 30 cents on the euro — in other words, about 30 percent of their face value. The most aggressive hedge funds are insisting that they will not sell for less than 35 cents on the euro.

That raises a risk that investors will push the price up to a point at which it does not make economic sense for Greece to complete the buyback.

“There is a limited amount of money to do this,” Mr. Stournaras said in an interview Saturday. “But in the end, I do think it will be successful.”

To seal the debt overhaul deal last week, after three late-night, marathon meetings in three weeks, Christine Lagarde, managing director of the I.M.F., had to fight to persuade reluctant finance ministers like Wolfgang Schäuble of Germany. She argued that Greece was sinking so far that without immediate relief, it might never repay its loans.

Article source: http://www.nytimes.com/2012/12/03/business/global/03iht-ministers03.html?partner=rss&emc=rss

DealBook: Bain Capital to Buy Call Center Business for $1.3 Billion

LONDON – The private equity firm Bain Capital agreed on Friday to buy the call center unit of the European telecommunications giant Telefónica for 1 billion euros ($1.3 billion).

The deal is the second announced by Bain Capital this week. The private equity firm co-founded by the U.S. presidential candidate Mitt Romney agreed on Wednesday to acquire the Apex Tool Group, a maker of hand and power tools, for $1.6 billion.

The deal for Atento, Telefónica’s call center division, comes after the Madrid-based telecommunications company canceled a proposed listing for the unit last year. Telefónica is eager to raise cash as it seeks to reduce its debt burden of around $75 billion.

Telefónica also is looking to raise cash through the initial public offering of its German subsidiary and expects to list the unit by the end of the year.

Under the terms of the deal for Atento, Telefónica said it would provide 110 million euros of financing to help Bain acquire the company.

The Spanish company also has signed a nine-year agreement to use Atento’s services, according to a company statement.

“This transaction is part of the policy of proactive management of the portfolio of assets of the company and the initiatives to increase Telefónica’s financial flexibility,” the company said.

The deal is expected to close by the end of the year.

Article source: http://dealbook.nytimes.com/2012/10/12/bain-capital-to-buy-call-center-business-for-1-3-billion/?partner=rss&emc=rss

DealBook: American Airlines Parent Company Files for Bankruptcy

The American Airlines counter at La Guardia Airport in Queens, New York.Ángel Franco/The New York TimesThe American Airlines counter at La Guardia Airport in Queens, New York.

The AMR Corporation, the parent company of American Airlines, said on Tuesday that it had filed for bankruptcy protection in an effort to reduce labor costs and shed a heavy debt burden.

AMR was the last of the major legacy airlines company in the United States to file for Chapter 11. Analysts said that its reluctance to do so earlier had left it less nimble than many of its competitors.

The company says it intends to operate normally throughout the bankruptcy process, as previous airlines have done. AMR does not expect the restructuring to affect its flight schedule or frequent flier programs.

“Our board decided that it was necessary to take this step now to restore the company’s profitability, operating flexibility and financial strength,” Thomas W. Horton, who was named the company’s chairman and chief executive on Tuesday, said in a statement. Mr. Horton, formerly the company’s president, is succeeding Gerald Arpey, who is retiring.

One of AMR’s chief goals in bankruptcy will be to lower its labor costs.

The company had been in contract talks with its unions until the negotiations stalled earlier this month when the pilots’ union refused to send a proposal to its members for a vote. Because federal bankruptcy rules allow companies to reject contracts, AMR may take a harder negotiating stance with its unions.

“Achieving the competitive cost structure we need remains a key imperative in this process,” Mr. Horton said, “and as one part of that, we plan to initiate further negotiations with all of our unions to reduce our labor costs to competitive levels.”

Once the nation’s biggest airline, AMR began to lose ground in recent years as low-cost carriers like Southwest Airlines grew in prominence. Major airlines were forced to respond by cutting fares.

As competition intensified, AMR responded by borrowing more and more, eventually pledging nearly all of its assets and leaving it heavily indebted. It also sought to reduce expenses, managing to cut $4.1 billion by the end of 2004.

But its principal competitors, including Delta Air Lines and the UAL Corporation’s United Airlines, filed for bankruptcy, shedding billions of dollars in costs and renegotiating labor contracts.

Both also sought mergers to gain scale. Delta paired off with Northwest, and United teamed up with Continental, allowing those airlines to return to profitability.

“Since their restructurings in Chapter 11, AMR’s major network competitors all have lower costs than AMR,” Isabella D. Goren, the company’s chief financial officer, wrote in a court filing.

As part of an effort to cut long-term costs, American earlier this year announced a $38 billion order for 460 new single-aisle planes from Airbus and Boeing, part of a major overhaul of its aging fleet of more than 600 planes that — with an average vintage of 15 years — remains one of the oldest and least fuel-efficient among the six major U.S. carriers.

American expects eventually to shave between 15 percent and 35 percent from its fuel bill with the introduction of the new planes — Airbus A320s and Boeing 737s — which will replace older McDonnell Douglas MD-80s and Boeing 757s and 767s. In an e-mail, Andrea Huguely, an American spokeswoman, said “it is our intent” to take delivery of the new planes as currently scheduled.

In the meantime, the airline has remained unprofitable. AMR has posted annual losses three years in a row, including a $471 million loss last year. It has recorded a $982 million loss through the first nine months of this year.

Given the airline’s shaky financial picture, speculation about an AMR bankruptcy filing also started to increase this year, spooking investors. The company’s stock price has dropped 79 percent in 2011.

As of Sept. 30, AMR reported $24.7 billion in assets and $29.6 billion in debt, according to a filing with the federal bankruptcy court in Manhattan. The company added that it had about $4.1 billion in cash and short-term investments that could be used to pay vendors and suppliers.

The company’s largest unsecured creditors include the Wilmington Trust and the Manufacturers and Traders Trust Company, which represent several classes of bonds.

Nicola Clark contributed reporting.

AMR is being advised by the investment bank Rothschild and the law firms Weil, Gotshal Manges; Paul Hastings; Debevoise Plimpton; and the Groom Law Group.

Article source: http://feeds.nytimes.com/click.phdo?i=5838df46c379c60bac24bb0ac598cc05