Barclays Steps in as JBS Scandal Drives Away Wall Street Banks

(Bloomberg) -- Barclays Plc has emerged as the go-to bank for the world’s largest meat supplier after scandals at the company pushed Wall Street to the sidelines.

JBS SA and its subsidiaries have sold at least four overseas bond deals totaling $2.75 billion since 2017, when the Brazilian powerhouse’s owners became embroiled in allegations of corruption. Barclays underwrote all of them. And another windfall could be on the way: The London-based bank is a top candidate to handle JBS’s planned initial public offering in the U.S., according to people familiar with the matter.

Barclays Steps in as JBS Scandal Drives Away Wall Street Banks

The company’s previous banks, including JPMorgan Chase & Co., Bank of America Corp. and Morgan Stanley, have backed off. That’s because JBS is controlled by Wesley and Joesley Batista, the billionaire brothers who confessed to bribing more than 1,800 politicians in Brazil. While JBS’s parent company agreed in 2017 to pay 10.3 billion reais ($2.8 billion) as part of a leniency agreement with Brazilian prosecutors, no deal has yet been reached with the U.S. Department of Justice to avoid prosecution under U.S. anti-bribery laws.

JBS has taken steps in the wake of the scandal that may assuage the concerns of compliance teams from banks, including the agreement with Brazil prosecutors, improved corporate-governance practices and the removal from management of the Batista brothers and other executives, the people said.

Barclays Steps in as JBS Scandal Drives Away Wall Street Banks

Barclays Chief Executive Officer Jes Staley, in charge since 2015, has been pushing the lender’s investment-banking unit to take more “measured risk” to boost returns. The firm has gained market share across trading and banking businesses, unlike many of its European rivals, helped by its prowess as an arranger of debt sales for clients, a Feb. 21 presentation shows.

A representative of Barclays declined to comment on the JBS relationship, as did officials at Morgan Stanley, JPMorgan and Bank of America. JBS declined to comment on its relationships with banks or the progress of talks with the Justice Department.

JBS, which has most of its operations in the U.S., is resuming plans for a listing in New York as a way to access cheaper financing. In 2016, before the scandal broke, the idea was to take public a unit comprising JBS’s non-Brazilian businesses and the domestic foodmaker Seara Alimentos Ltda. While Morgan Stanley had been hired to handle that deal, it’s now less likely the New York-based company will get the business if the meat producer doesn’t reach a legal agreement in the U.S., the people said.

Underwriting Rankings

Morgan Stanley was the top equity underwriter in the U.S. last year, according to data compiled by Bloomberg. Barclays ranked sixth, after JPMorgan and Bank of America.

Before 2017, Barclays already had a relationship with JBS, participating in five of 14 bond deals by JBS companies, while JPMorgan underwrote at least 10, according to data compiled by Bloomberg. Bank of America handled four and Morgan Stanley, three.

Barclays Steps in as JBS Scandal Drives Away Wall Street Banks

JBS is facing challenges aside from a shorter list of banks willing to handle its transactions or provide credit. The failure to reach an agreement with the Department of Justice may also make it hard for the company to access some investors who would otherwise participate in an IPO, the people said.

Relations between JBS and JPMorgan and Morgan Stanley were shaken in June 2014, when those banks helped Tyson Foods Inc. counter JBS’s acquisition bid for Hillshire Brands Co., the maker of Jimmy Dean sausages and Ball Park hot dogs, people familiar with the matter said at the time. Tyson won the transaction and JBS fired JPMorgan from a share offering and Morgan Stanley from a bond deal.

Barclays and Bank of America got JBS bond deals at the time, and the firm’s ties to Morgan Stanley improved again in subsequent years, as the bank was hired for a 2015 debt issuance and also for the 2016 IPO plan. JPMorgan, the more frequent underwriter before the 2014 event, never again participated in a bond deal from the firm.

JBS expects to reach an agreement with U.S. authorities by the time it’s ready to go to market with its IPO, though such a deal won’t be a precondition for the share sale as the company has been showing improving profits and reduced leverage, another person said.

While Barclays was the only bank to work on every JBS bond sale since 2017, other firms participating on the various transactions included Rabobank, Royal Bank of Canada, BB Securities, Banco Bradesco BBI SA, Banco BTG Pactual SA, Banco Santander SA and Bank of Montreal, data compiled by Bloomberg show.

©2019 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.