EM LATAM CREDIT: Adecoagro: Mandate Investor Calls - New Issue Fair Value
(AGRO; Ba2/BB/NR)
"MANDATE: Adecoagro SA to Hold FI Investor Calls Friday
Concurrently, Adecoagro intends to announce an offer to purchase for cash any-and-all of its outstanding 6.000% Notes due 2027" – Bbg
IPTs 5Y: N/A
FV 5Y: 7.25% Area
IPTs 7Y: N/A
FV 7Y: 7.75% Area
• The Brazil based South American industrial agriculture company Adecoagro mandated investor calls potentially leading to the issuance of USD benchmark senior unsecured 5- or 7-year maturity notes. The use of proceeds will be partially to purchase for cash any and all 6% 2027 notes.
• Brazil based protein food processor Minerva (BEEFBZ; Ba2/BB/BB) 2031s were last quoted 6.63%. We view Adecoagro’s business profile as less stable than Minerva given its volatile sugarcane and ethanol business comprised on average about 80% of EBITDA in the past five years.
• We would expect a higher yield than Minverva bonds despite similar ratings, but less than corn-based ethanol processor FS Luxembourg (FSBIOE; Ba3/NR/BB-) with 5-year notes quoted 8.14% and 8-year notes yielding 8.82%. In addition to a bit more diversified agriculture business, AGRO’s lower leverage of 1.7x at 1Q 2025 compared favorably to FS expected debt leverage of 3.5x for 2025 according to Fitch.
• Another comp would be another Brazil sugar cane and ethanol processor, higher rated Raizen (RAIZBZ; Baa3/BBBneg/BBB) with 2032 notes quoted 6.45%. Raizen’s earnings have been under pressure recently and debt leverage has been elevated leading the company to propose non-core asset sales with proceeds to reduce debt.
• To judge the 5s/7s curve, in addition to interpolating the FSBIOE curve, we can look to another BB rated Brazil corporate issuer, Globo Communicacoes (GLOPAR; Ba2/BB+/BB+) with 2030 notes quoted 6.3% and 2032 notes quoted 6.72% so 42bp apart.
• Lastly, we should keep in mind that Adecoagro was recently acquired by investment firm Tether and while the company has pledged to maintain similar financial and management policies under the new ownership, there is always the risk that the situation changes.
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