The surprise departure of Marfrig Global Foods’s cost-cutting chief executive officer is triggering alarm among bondholders and raising doubts over management’s commitment to rein in debt.
Its $775 million of notes due in 2020 tumbled by the most since April 2013 on 15 January, after the hamburger supplier to McDonald’s Corp. said Sergio Rial will leave next month. In the past year, the bonds had the biggest returns among 100 junk- rated food companies on optimism Marfrig would generate more cash than its spends for the first time since 2007.
During his one-year tenure, Rial focused on cutting debt, selling assets and closing plants. Interest expenses plummeted and earned Marfrig upgrades on its debt ratings. With Rial’s exit, investors are concerned the meatpacker won’t keep up with his turnaround plan, said Quesnell Capital’s Ian McCall.
“Marfrig lost its head cheerleader,” McCall, a money manager at Geneva-based Quesnell, which oversees $107 million, said in an e-mail. “Rial was the visible face who orchestrated the turnaround.”
The company said in a regulatory filing yesterday that Rial, a former Cargill Inc. and Bear Stearns executive, will be replaced on Feb. 16 by Martin Secco Arias, the head of Marfrig Beef Southern Cone. He’s leaving the meatpacker to become the chairman of Banco Santander SA’s Brazilian unit, according to a person with direct knowledge of the matter.
No ‘Surprise’
Marfrig has been working with transparency, and the continuity of results will be recognized by the market, Chief Financial Officer Ricardo Florence said in a telephone interview, when asked to comment about the drop in the company’s bond prices.
“There won’t be any kind of surprise,” Rial told investors and analysts during a conference call yesterday. “Martin as well as the other members of the executive committee were part of everything we committed to the market.”
Secco has worked for Marfrig Global Foods since 2007, when the company bought Frigorifico Tacuarembo in Uruguay, in which he was a shareholder. Marfrig’s units under his command included those in Uruguay, Argentina, Chile and the state of Rio Grande do Sul in Brazil.
Bloomberg News, edited by HI
