Cemex Heads Close to Junk

Cemex – not long ago the bluest of Mexico’s industrial blue chips – is running into trouble with debt refinancing, according to S&P. The agency revised downward its ratings on Cemex’s long-term credit and senior unsecured debt to BBB minus from BBB, bringing it one notch above junk. Analyst Juan Pablo Becerra projected weaker revenues and cash flow generation in 2009 and a difficulty to further reduce debt through asset sales because of the near-freeze in the credit markets. Becerra also noted the outlook for Cemex is negative, reflecting “the risk of further deterioration in the company’s financial condition due to the weakness in the global economy.” He also said that “a downgrade is likely if Cemex fails to improve its funds from operation-to total net adjusted debt ratio to a low 20% by 2010 and if it is unable to refinance its 2009 maturities well in advance.” After recent news of a $500m mark-to-market loss at Cemex, UBS earlier this week cut the cement giant’s stock to sell from neutral. The shop does not expect the company’s operating outlook to improve until 2010, and forecasts an Ebitda decline in 2009.