Cemex Passes Target, Aims Higher

Despite clinching the 85% creditor acceptance level needed to extend maturities on more than $7bn in debt, Cemex is extending the deadline of its exchange offer in the hopes of topping 95%. The Mexican cement maker has reached more than 90%, it says, with an additional 1.5% expressing interest in participation, and has pushed the deadline to September 7. “It is very ambitious, and technically they have the 85% needed to amend covenants. Anything else is gravy at this point,” says a New York-based EM investor. “The intention is to have a viable and successful transaction and reduce costs as much as possible,” a Cemex spokesman says, noting that hitting the self-imposed 95% target would send a stronger message to the markets. Bonds across Cemex’s curve were up 1-2 points Tuesday, according to investors. Despite the sheer size of the debt involved, investors have reacted favorably to the exchange since it was launched at the beginning of July. The borrower was seen as acting proactively – the debt, from Cemex’s 2009 restructuring, isn’t due until 2014 – and the exchange seen as preferable to a default of that size. Cemex is offering lenders an exchange of their current exposure into one or more of new 9.5% 2018 bonds, new 2017 loans paying Libor+525bp, new 2017 USD private placement notes paying 9.66%, or new 2017 yen-denominated private placement notes paying 7.735%. The interest rates on the loans and private placement notes reduce over time based on prepayment targets. As of Tuesday, Cemex planned to issue $470m in the new 2018 bonds, which are capped at $500m, callable in 2016 and guaranteed by more than seven Cemex units. Participating creditors receive an exchange fee of 80bp, and a 50bp additional cash fee if the Cemex ADS exceeds US$14.50 during the 90 days after April 1, 2015. Cemex may elect to close the transaction prior to September 7.