Moody's lowers Smithfield's ratings on poor hog outlook 

Despite a pending sale of its beef business that would boost its coffers, top US pork producer Smithfield's long-term debt rating was taken down another notch by Moody's Investor service, with probability of default rating to B1 from Ba2.

The ratings agency said in a press release the move was made on expectations that credit metrics will remain weak in the near term due to poor returns in the hog production business.

Moody's said it is continuing its review for possible downgrade, pending the sale of Smithfield's beef business.

Should the sale of its beef business be completed soon, Moody's said it is likely to confirm Smithfield's new long-term ratings, although with a negative outlook given weak live hog prices.

JBS is expected to pay Smithfield US$565 million in cash for Smithfield's beef business. 

Additional proceeds of about US$150 million are expected when cattle are liquidated from its Five Rivers operation over the 12 months following the transaction.

Moody's said although the sales would reduce the company's debt and improve the company's financial flexibility, it does not expect Smithfield's credit metrics after the transaction to be equal to its previous rating, "given high pre-transaction debt levels and the erosion of profit margins."