Moody's rates Sadia note Ba2

Moody's Investors Service said it assigned a Ba2 foreign-currency rating to Sadia SA's proposed issuance of at least $150 million guaranteed senior unsecured notes with a maturity of at least seven years.

The outlook is positive.

The proposed notes will be issued by Sadia Overseas Ltd., a wholly owned Cayman Islands subsidiary of Sadia, with the unconditional and irrevocable guarantee from Sadia. Moody's expects that the majority of the net proceeds will be used to prepay existing debt, resulting in a marginal increase of its debt.

The agency said the company's Ba2 global local-currency corporate family rating continues to reflect Sadia's strong brand portfolio and solid market position in most of the diverse product categories in which it participates, its highly competitive cost structure, its conservative financial policies and worldwide geographic sales diversity.

These positive factors balance against Sadia's exposure to earnings volatility due to commodity price movements, the risk of export markets being closed to its products and the fact that free cash flow will be negative for the next few years because of the company's high capital expenditures program aimed at increasing its existing production capacity by 30% to 40%, Moody's said.

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