Minerva bond deal: beef up your due diligence

6 minute read

Brazilian meat exporter and processor Minerva Foods is in the market for a potential $1bn 10-year senior unsecured bond issuance to finance the acquisition of sixteen plants from competitor Marfrig.

This acquisition, announced on 29 Aug 2023, will create a beef giant in Brazil, with clear sustainability and valuation concerns given ongoing regulatory focus on deforestation.

We see significant sustainability risks for Minerva Foods that could lead to weak bond performance. We believe enhanced due diligence should focus on the following questions.

Firstly, the plants being purchased have now been made public. There is evidence that at least two of these have sourced cattle from illegally deforested land.

Secondly, the EU Regulation on deforestation-free supply chains prohibits the sale of products in the EU that contribute to deforestation. The costs of either improving supply chain management to comply, or the fines for non-compliance, will be significant.

Lastly, Minerva is at increasing risk of being subject to investment exclusions, or struggling to find banking partners. Deforestation risk is increasingly being accounted for by the investment and banking community and may fall into the scope of more exclusion policies.