Venezuela to Pay Cemex Cash Compensation

Venezuela’s government plans to pay $600 million to Mexico’s Cemex as compensation for the assets it lost to a nationalization campaign in 2008, with a large portion to be settled using debt issued by state-owned oil company PDVSA. The deal also contemplates paying the company an additional $154m for accounts payable that Cemex subsidiaries owed to its parent at the time, the Mexican cement company says in a statement. As agreed, Venezuela will make an initial payment of $240m in cash and $360m in “various negotiable securities issued by PDVSA,” Cemex adds. Cemex officials could not immediately be reached for comment. It remains unclear what PDVSA instruments the company accepted as payment, what their face value is and what kind of discount the company calculated in accepting the paper. Some analysts that follow the situation believe the company may be receiving shorter maturity paper and may not get the full $360m if it chose to sell that paper immediately. PDVSA’s 2013 bonds, its shortest paper, currently trades at 95, yielding 11.2% as of Thursday. The PDVSA 2014s trade at 78 or at 14.9% on a yield basis. It remains to be seen if Cemex must hold on to the bonds until maturity to get the $360m owed or if it can monetize that amount by selling the instruments sooner. Cemex lost its Venezuelan cement assets in April 2008, when President Hugo Chavez decided to force foreign cement makers into minority partnerships with the government. Lafarge and Holcim went along, but Cemex rejected an original $650m purchase price as too low and took Venezuela to international arbitration through ICSID.