S&P Lifts Corp. Rating on Pilgrim's Pride (PPC) to 'BB+'; Sees Operations Continuing to Stabilize

Standard & Poor's Ratings Services today raised its corporate credit rating on Pilgrim's Pride (NASDAQ: PPC) to 'BB+' from 'BB'. The outlook is positive.

We also raised the issue-level rating on the company's senior secured $700 million revolving credit facility and $1 billion first-lien term loan due 2020 to 'BBB' from 'BBB-'. The recovery ratings are unchanged at '1', indicating our expectation for very high recovery (90%-100%). In addition we raised the issue-level rating on the senior unsecured notes due 2025 to 'BB+' from 'BB'. The recovery rating is '3', indicating our expectation of (50%-70%, at the high end of the range) recovery in the event of a payment default.

The upgrade in part reflects the upgrade of parent company JBS S.A. (for more information, see "JBS S.A. And JBS USA Upgraded To 'BB+' From 'BB' On Strong Cash Flow Generation And Lower Debt; Outlook Still Positive," published earlier today). Standard & Poor's caps the corporate credit rating at 'BB+', the same as that of parent company JBS, reflecting JBS' majority ownership of PPC and our belief that PPC is a "highly strategic" subsidiary.

The upgrade also reflects Standard & Poor's belief that PPC's operations will continue to stabilize, including lower feed costs and other identified cost reduction initiatives in place. "We believe these cost reductions and improved pricing practices have reduced the company's earnings volatility, which should allow it to perform better during weaker earnings cycles," said Standard & Poor's credit analyst Stephanie Harter.

The positive outlook reflects Standard & Poor's opinion that the company´s credit quality could continue improving on the back of healthy operating performance and stronger discretionary cash flows in 2016, which could make us revise upwards our assessment of PPC's financial risk profile. A higher rating is also contingent on an upgrade of JBS, as PPC's ratings are capped by JBS' group credit profile.

We could change the outlook to stable if we revise the outlook on JBS to stable or if operating performance unexpectedly weakens, debt to EBITDA approaches 3x, and FFO to debt nears 30%.

You May Also Be Interested In

• Midday movers: PepsiCo, JetBlue fall; GM, Danaher and UPS rise
• Oppenheimer Reiterates Outperform Rating on Take-Two Interactive (TTWO)
• Invesco (IVZ) PT Lowered to $17 at BMO Capital