Markets Like Cemex Refi Proposal

Facing some $7.2bn due in 2014 and a difficult global environment with a weak US recovery, Cemex plans to ask lenders for a 3-year extension, it says, a proactive move that analysts and investors are welcoming. At least 60 lenders holding debt from the Mexican Cement maker’s $14bn 2009 financing agreement are scheduled to meet with the company June 29 and July 2 in Madrid and New York. Cemex is proposing a maturity extension from February 2014 to February 2017, an upfront fee and revised margin, a $1bn pay down in 2013, an enhanced guarantor package and revised operational and financial covenants. “If accepted by all creditors, it would postpone nearly $6bn in principal payments from 2014 to 2017. While uncertainty remains large in the global economy now, presumably by 2017 the construction sector would recover, allowing the company either to repay its loans or refinance under easier terms. Today’s announcement does add some certainty,” says Joe Kogan, head of EM strategy at Scotiabank. Cemex says it has discussed the matter with banks holding approximately 50% of the outstanding balance under the refinancing agreement, and expects to make the $1bn payment in 2013 using funds from selected asset sales. Cemex declines to comment on specifics of the proposal. “This is pretty good news with 50% of lenders on board. Cemex is cash positive, but they need more time and we have not had a serious recovery. They are doing things right, though it is not exactly clear what the new funding rate will be or where they will get the $1bn,” says a New-York based EM investor. “Nothing about this is surprising, but the good thing is that this is happening now and not in late 2013.They have already had conversations with creditors and have decided to go forward, so the expectation is that they already have a workable plan that most would accept,” says an EM credit analyst familiar with the company. The extension could allow Cemex to go to the bond market to address bond maturities out