Cemex Equity Draws Fevered Pitches

With a $15bn bank debt restructuring practically in the bag, Cemex management is heard turning its focus to an intensifying stream of pitches coming from ECM teams across the Street for its expected equity offering. Bankers close to the company agree on several points: 1) the equity market today would be receptive to a Cemex offering; 2) conditions permitting, Cemex should use positive momentum from the successful closing of its restructuring to launch a deal, which implies pricing as early as September; 3) the company is considering hybrid structures that could help it avoid dilution at current lower trading levels, though one banker argues the case for a plain vanilla trade is also strong, given the company’s already complicated financing scheme, and 4) the size of an issue would depend on a number of factors, including the company’s ability to continue selling assets, though a reasonable expectation might be of an offering equal to roughly 10% of the company’s market cap, which stood at $9.5bn on Friday. One syndications banker says the company and its creditors are in full agreement that the most effective way to reduce leverage is through an equity offering, though the company will not be forced to tap if market conditions aren’t supportive. Cemex is, however, being incentivized in its restructuring agreement to prepay its bank debt, and asset sales may not cover much of what it needs for that. Reducing leverage right away would also put the company in a better position to consider a bond offering in 2010, possibly even with an improved credit rating. Cemex is today rated B/B2/B minus. Bond proceeds would be used to pay down more bank debt and extend its maturity profile. “The market is expecting this [equity offering,]” says one Cemex equity analyst, who remarks that despite the overhang, large orders for the stock have come across his shop’s desk in recent days. Cemex ADRs have risen 40% since July 10, and closed Friday at $10.93, up 3.0%.