Cemex Tumbles Down Ratings Ladder

Rating agencies are accused of being too slow to downgrade troubled Mexican corporates. However, Fitch and S&P are taking no chances with Cemex, which Monday surprised the bank market with plans to refinance $14.5bn in loans after abandoning a bond issue. S&P dropped the rating 5 notches, to B minus from BB+, while Fitch chopped it 3, to B from BB. Both imply a high probability of default for the cement company, which was still investment grade for S&P in January. Both agencies keep the credit on review for further downgrade. The new ratings “reflect Cemex’s high leverage, deteriorating economic conditions, poor liquidity and limited access to the capital markets,” Fitch says. Cemex faces challenges as it seeks to renegotiate debt coming due over the next few months, it explains, and risks remain high until it is able to reach a broad agreement allowing it to lengthen the maturity of a significant portion of its debt due 2009-2011. S&P notes that “depressed asset prices and the near-freeze in global credit markets may hamper refinancing efforts and asset sales, causing access to resources to take longer or be lower than we originally expected.” Cemex had been preparing to address its most immediate liquidity issues with the sale of $200m-$500m in notes of 5-10 years. The deal was postponed after it became clear the issuer would face paying a yield at least in the high teens. Citi, BBVA, HSBC, RBS and Santander managed both the January loan renegotiation and attempted bond sale. Bankers familiar with the credit say Cemex will have to sell something big – perhaps at a loss – in order to revive its flagging fortunes. Moody’s does not rate Cemex.