Cemex Repours Covenants

Following the announcement of its fourth straight quarterly loss, Cemex has asked to rework bond covenants. The cement maker announced that it has agreed to pay a 25bp fee in order to make the changes, and will pay 100bp if it does not raise $1bn in equity or equity-linked securities by the end of 2011. In return, Cemex gets to reset its maximum consolidated leverage ratio to 7.75x 12-month trailing Ebitda through June 2011, decreasing gradually to 4.25x by year-end 2013. Previously it was to be 6.75x though the end of this year, before falling gradually to 3.5x by year-end 2013, according to Barclays. Cemex also reset its minimum consolidated coverage ratio to 1.75x during 2011-2012, and 2x through year-end 2013, from previous requirements of 1.75x to the end of 2011, 2.0x by June 2012 and 2.25x by year-end 2013, according to Barclays. Cemex also notes amendment to the terms of the reserve of its domestic bonds to improve liquidity and refinancing risk management, without elaborating further. Shares rose 7%, to MXP10.84, and bonds tightened 25bp, according to a report from Scotia. While Scotia notes likes the bonds from a fundamental perspective, “for spreads to rally, we think Cemex needs to demonstrate an inflection point in the downward trend in prices and volumes in order to reassure investors,” it says.